The Retirement Savings Time Bomb . . . and How to Defuse It by Ed Slott

Author:Ed Slott
Language: eng
Format: mobi, epub
ISBN: 9781101589960
Publisher: Penguin Group US
Published: 2012-01-02T21:00:00+00:00

Determining the Designated Beneficiary

The designated beneficiary on your IRA or company plan will not be determined until September 30 of the year following the year of the IRA owner’s death. Say what???

For example, if the IRA owner (that’s you) dies in 2011 (let’s pray not), then the designated beneficiary will be determined on September 30, 2012. On that date, there will only be one designated beneficiary left standing and that person (hopefully the one you named) will officially become the designated beneficiary.

“Could someone besides the beneficiary I name end up the designated beneficiary on September 30 of the year after my death?”

“Easily.” You see, the period between the IRA owner’s death—say, June 10, 2011—and September 30, 2012 (the September 30 of the year after the owner’s death), is what is commonly known as the “gap” period (see Figure 7) during which a variety of things can happen. A beneficiary can be changed during the gap period (but only to some other beneficiary actually named by the IRA owner). The change can be to another primary beneficiary or a contingent beneficiary (terms I’ll get to shortly), but it cannot be changed to anyone whose name was not put on the IRA beneficiary designation form by you. So, your designated beneficiary could wind up being a different person than you may have had in mind, but no new designated beneficiary can be introduced after your death.

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