How best to designate Beneficiaries for 403b/401k/IRAs if children are minors
After my spouse as a sole beneficiary for my 403b/401k and IRAs, I have my children listed as contingent beneficiaries. They however are all still minors and therefore would not be able to execute any financial documents or changes until they each become adults.
What are the pitfalls of having minor children as the contingent beneficiaries? Is there a better way to designate contingent beneficiaries and still “stretch” the tax-deferred retirement account(s).
I do not have any trust(s) except a testamentary one. Trusts in general sound a bit too complicated with tax ramifications which I do not fully understand.
Permalink Submitted by William Tuttle on Thu, 2015-05-14 00:57
It is unwise to name minors as beneficiaries on any account. Minimizing risk and liabilities is the biggest thing driving financial institution policies regarding such a situation. Do you want this left to chance and a player to be named later (custodian from hell).You really need to disucuss this with the financial institutions holding your 403B, 401k, IRA accounts. Different insititutions have different policies regarding UGMA/UTMA Inherited retirement accounts and even testamentary trusts.You probably need the services of an estate planning professional. I would think that some combination of well crafted beneficiary designations, will deignations (inclding testamentary trusts), and if necessary separate inter vivos trusts.Also, when necessary and where possible, changing the financial institution to one more accomadating to the situation.