Estate Planning Red Flag – You’re leaving your IRA to a child

Description

Abstract: Many people designate a child or other young person as beneficiary of an IRA. But there’s a downside to doing so: Unless the child is a minor, he or she obtains full control over the IRA, so there’s nothing to stop him or her from taking larger distributions or even cashing out the entire account. One solution that preserves the IRA for as long as possible is to name a trust as its beneficiary and then name the child as the trust’s beneficiary. This short article explains why designating a minor as the beneficiary of an IRA isn’t advisable.