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One of today's most common mistakes is designating your estate or your living trust as the beneficiary of your IRA. If you do so, your heirs will not be able to stretch payments over their lifetime. Rather, they will probably be required to deplete the account within five years.


Here are some options to consider when designating the beneficiary of your IRA:

-          If you name your spouse as your sole beneficiary, the applicable period for the required minimum distributions is the life expectancy of the surviving spouse.

-          If a non-spouse is your sole individual beneficiary, he or she is required to receive distribution over the course of their life expectancy.

-          If there are multiple beneficiaries who have not established separate accounts by December 31 of the year following your death, then all the beneficiaries will be required to receive distributions over the oldest beneficiary's life expectancy.


In conclusion, either divide your IRA into separate accounts now, or be sure to mandate that separate accounts should be established on or before December 31 of the year following your death.


-By Frank L. Festi, Jr., CPA, CFP (Medina office)


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