||If you designate a person to receive an account before your death they are allowed
to use the IRS required minimum distribution tables which allow most of the money to continue to grow tax deferred.
Why is this important? Lets say you have a retirement account worth $200,000 that you leave to an heir who is
in their late 40s. If this person spreads receipt of this money out over a 30-year period (which they are allowed to
do as the designated beneficiary) the $200,000 sum has a chance to grow to a significant amount. However, if you
failed to designate a beneficiary then the person(s) ultimately inheriting the would have to withdrawal all monies
within 5 years of your death. Obviously this would cost a great deal in taxes, and in lost tax-free growth
Naming a trust as the beneficiary has absolutely no tax advantages. The only times I would ever suggest that you
have a trust named as the beneficiary is if you have a spendthrift spouse that you want to protect. Or if you
have minor children that you do not want to have access to large sums of money until they have matured. Another
exception would be if you wanted to leave your account to a charitable organization.
I implore you to name a beneficiary, and not just the primary beneficiary. Most people simply name their spouse.
But what happens if you both perish in an accident? Then your children would be forced to withdraw the money
within a 5-year period. It pays to not neglect this critical estate planning decision.