Rocket Dollar Knowledge Base

What is a beneficiary? How do I name a beneficiary to my Self-Directed IRA account?

A beneficiary is a person(s) who, in the event of your passing, would take control of your IRA account and assets. Every Rocket Dollar IRA customer should name a beneficiary.

Where do I name a beneficiary?

You will name a beneficiary at signup for an IRA account. If you have any issues, you can email Support from your fulfillment emails to update to change your beneficiary after you complete checkout.

Why should you name a beneficiary

  • Keeping your estate in order and hassle-free for your heirs. It's a small procedure, but one people often push off and could cause significant problems later.

  • Tax Benefits. Naming a beneficiary makes the transfer of assets smoother, and saves the beneficiary the trouble of going through the estate.

  • Leave a financial impact after you are gone.

Who should be a beneficiary?

  • Your spouse
  • Your children
  • Your parents
  • A trusted immediate or extended family member
  • If you are not married but have a domestic partner
  • A trusted friend who is aware of your intentions, financial situation, and financial plan
  • A trust

Can a minor be a beneficiary?

Our signup form requires the beneficiary to be over 18. If you need a minor to be your beneficiary, set yourself as the beneficiary and then after your account setup, email us at support@rocketdollar.com and make the request to change your beneficiary to the minor.

Can a non-citizen be a beneficiary?

Yes, but if the person does not have a social security number, please contact Rocket Dollar. This may present challenges during the sign-up process

The account owners cannot move US retirement accounts to foreign retirement accounts in foreign countries they reside, or vice versa as they are under different tax structure and laws there.

What should I keep in mind?

  • Tax Planning. Sending your IRA to your spouse vs. your children can have significant tax implications.
  • Generational Planning. When you are gone, how do you want to leave a financial effect on your family?

  • An IRA might not be in the immediate control of a minor. Keep in mind if you would want to utilize a trust, trustee, or guardian.

  • Make sure that your beneficiary would be able to manage your investments or could have assistance from a trustee, or financial advisor.

  • It could make sense to leave extra instructions in your will to provide clarification to your beneficiaries.

Straight from the IRS...

(IRS rules are subject to change. The text below is from the IRS is educational but not tax advice. Please check IRS.gov and consult your CPA before making any tax planning decisions)

What if You Inherit an IRA?

If you inherit a traditional IRA, you are called a beneficiary. A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive.

Inherited from a spouse.
If you inherit a traditional IRA from your spouse, you generally have the following three choices. You can:

1. Treat it as your own IRA by designating yourself as the account owner.

2. Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a:

    1. Qualified employer plan,
    2. Qualified employee annuity plan (section 403(a) plan),
    3. Tax-sheltered annuity plan (section 403(b) plan),
    4. Deferred compensation plan of a state or local government (section 457 plan), or

3. Treat yourself as the beneficiary rather than treating the IRA as your own.

 

If a surviving spouse receives a distribution from his or her deceased spouse's IRA, it can be rolled over into an IRA of the surviving spouse within the 60-day time limit, as long as the distribution is not a required distribution, even if the surviving spouse is not the sole beneficiary of his or her deceased spouse's IRA.

 

Treating it as your own.

You will be considered to have chosen to treat the IRA as your own if:

  • Contributions (including rollover contributions) are made to the inherited IRA, or
  • You don't take the required minimum distribution for a year as a beneficiary of the IRA.

You will only be considered to have chosen to treat the IRA as your own if:

  • You are the sole beneficiary of the IRA, and
  • You have an unlimited right to withdraw amounts from it.

See Our IRA Plan