IRA CUSTODIAL DOCUMENT CHECKLIST

Proper IRA planning can help you and your family retain more family wealth through the Stretch IRA as we have previously seen. The major problem is that the proper planning is usually not done or followed through. The IRA is for most people their largest asset. The last thing any IRA beneficiary wants to do is to have to drain an Inherited IRA prematurely.

This can happen if there is not enough liquidity in the estate to pay estate taxes or worse yet because the IRA custodian says you have to. Why would the custodian care you ask? You might think that you planned the stretch out perfectly, named the appropriate beneficiary, have records, etc., except you may have forgotten one thing; the IRA Custodial Document. Much to the surprise of your beneficiary, they discover that the IRA Custodian will not allow the stretch, requires a five-year payout,  does not allow a trustee-to-trustee transfer, or a number of other limitations. 

This happens more than you might think. Many custodians are not up on the current IRA rules which state that the default option for beneficiaries in the Stretch. It is really quite amazing that the IRA Custodial document can be more restrictive than IRS Rules. This is why you must protect yourself and ask the following questions:

1. What is the "default option" when there is no beneficiary named?

2. Are "per stirpes" beneficiary provisions accepted?

3. Is a customized beneficiary form accepted?

4. Can the beneficiary name a beneficiary?

5. Can non-spouse beneficiaries move investments via a trustee-to-trustee transfer?

6. Are multiple beneficiaries and IRA splitting allowed?

7. Will a trust be accepted as beneficiary?

8. Will your Power of Attorney form be accepted?

9. Is there a divorce provision?

10. Is there a "simultaneous death" provision?

11th and most important question of all...

Does the IRA Custodian allow a Stretch IRA for beneficiaries? As unbelievable as it may sound, there are still some who do not.

Don't be too sure you know the answers to these questions as a mistake could cost your family millions! Contact your IRA custodian, financial advisor, broker, mutual fund company, or anyone who handles your IRA to get these answers. For more information on IRA planning and the Custodial Document Checklist, contact my office.