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One of the most important estate-planning decisions for investors is how to properly designate beneficiaries of their retirement accounts. In most scenarios, the logical choice is to designate individuals as beneficiaries — as opposed to the estate — to allow for the IRAs, once inherited, to “stretch” the distributions for as long as possible. The longer the IRA is sheltered from taxes, the more potential it has to grow and accumulate wealth. Naming an individual is a simple and strategic method to stretch an IRA. However, the real world is not always simple, and there are often other factors to consider when determining beneficiaries.
There are no crystal balls to tell us when our time on earth will be up, but some people do experience close calls. These instances are jolting reminders that while our time is limited, our planning and preparation can’t be.