Beneficiaries on non-IRA accounts
My understanding is that IRA-type accounts should have beneficiaries on them, and they pass to the beneficiaries without going through probate. But non-IRA accounts should not have beneficiaries, as I understand it, as they pass through the will. But what is the problem in having beneficiaries on them, if it avoids probate?
Thanks in advance.
Permalink Submitted by Alan - IRA critic on Fri, 2024-08-09 13:34
A non IRA account may be a joint tenancy account or have a POD or TOD. In either case they would pass to the surviving joint tenant or TOD beneficiary directly and not affected by the will or probate. This can be good or not so good depending on the overall nature of the estate.
Estate attorneys generally want all the non retirement plan assets to go into the estate so the estate executor will have access and control of these assets to pay for all final costs such as debts, taxes, final expenses, executor fees, etc. If too little was left in the estate to pay these expenses, there could be several problems and the executor may want to ask the TOD beneficiaries to chip in.
So in some cases naming TODs will be a problem and in other cases it can be beneficial as long as enough goes to the estate to cover all expenses.