Sjoberg & Tebelius, P.A.
Serving Minnesota & Western Wisconsin

Choosing the Right Beneficiary for Your Retirement Account

Retirment-photo.pngSaving for retirement is an essential part of financial planning. In addition to funding your retirement years, it is also important to consider what will happen to those funds if you should die unexpectedly. That decision culminates in your designation of an account beneficiary.

A will does not dictate how an IRA or another retirement account will pay out upon your death. In fact, the choice you make on the beneficiary-designation form overrides anything to the contrary in your will.

Below, we discuss the pros and cons of two common beneficiary designations: designating a spouse and creating a trust.

Designating your spouse

For those who are married, choosing their spouse as the beneficiary for a retirement account seems like the obvious choice. In many cases, this is a smart option. Your spouse can access the money right away, or they have the option to roll those funds over into their own IRA and choose a beneficiary.

However, designating a spouse means giving up a certain amount of control over retirement funds. Plus, inheriting a retirement account can have adverse tax implications.

Creating a trust

Choosing to have a trust as your designated beneficiary addresses some of the control problems discussed above. A trust provides the maximum amount of control by including specific instructions about how you want the funds to be used. Those who want to ensure some funds go to their children benefit from putting their retirement funds in a trust.

However, creating a trust means incurring the costs of having a trustee to oversee your affairs. For those whose retirement account holds modest funds may wish to avoid those costs.

Consider all of your options

Just like the decisions you make about how you wish to spend your retirement, decisions about how you want retirement funds to be distributed to others are essential. Talking to an experienced estate planning professional can help you determine the best beneficiary designation for your situation.

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Sjoberg & Tebelius, P.A.

2145 Woodlane Drive
Suite 101
Woodbury, MN 55125

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Phone: 651-315-8856
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