What Happens to My IRA When I Die?

When you pass away, your IRA assets will be distributed according to the instructions you provided in your beneficiary designation. If you have not named a beneficiary, or if your beneficiary predeceases you, your IRA assets will be distributed according to the terms of your will or, if you do not have a will, according to state law.

Beneficiary Options

Spouse: Your spouse is the default beneficiary of your IRA, unless you specify otherwise. If your spouse is alive when you die, they will receive the entire balance of your IRA.
Children: If you do not have a spouse, your children will be the default beneficiaries of your IRA. If you have more than one child, they will share the balance of your IRA equally.
Other beneficiaries: You can name any individual or entity as the beneficiary of your IRA, including friends, family members, charities, or trusts.

Required Minimum Distributions

If you have not begun taking required minimum distributions (RMDs) from your IRA before you die, your beneficiaries will be required to take RMDs based on their own life expectancies. The amount of the RMDs will depend on the age of the beneficiary and the value of the IRA at the time of your death.

Estate Taxes

If your IRA is worth more than $12.92 million in 2023, it may be subject to estate taxes. Estate taxes are only due on the portion of your IRA that exceeds the estate tax exemption amount. The estate tax exemption amount is $12.92 million for individuals and $25.84 million for married couples in 2023.

Planning for IRA Inheritance

It is important to plan for the inheritance of your IRA to ensure that your assets are distributed according to your wishes. You can do this by:

Naming a beneficiary: Choose a beneficiary who you trust to manage your IRA assets. You can name multiple beneficiaries or specify the percentage of your IRA that each beneficiary will receive.
Creating a will: If you do not have a beneficiary, or if your beneficiary predeceases you, your IRA assets will be distributed according to the terms of your will. It is important to create a will to ensure that your assets are distributed according to your wishes.
Considering a trust: A trust can be used to manage your IRA assets after your death. A trust can provide a number of benefits, such as asset protection and tax savings.

By planning for the inheritance of your IRA, you can ensure that your assets are distributed according to your wishes and that your beneficiaries are taken care of.

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