Consider Creating Retirement Accounts
IRAs, Roth IRAs, and employer-provided retirement accounts are like life insurance. The retirement benefits are paid to the beneficiary or beneficiaries you named when you opened the retirement account or completed the paperwork with your employer.
As you now realize, it is irrelevant if your will names someone else as beneficiary. The only way your retirement benefits will be governed by your will is if you named the estate as the beneficiary of your retirement benefits or the person or persons you named are not alive. Then your retirement benefits will be paid to your estate and will need to be probated.
It is very important to double-check your documents to see who is named as beneficiary of your life insurance policies and your retirement accounts. The beneficiary or beneficiaries you named initially may not be who you want today to receive the benefits at your death.
Although life insurance proceeds and retirement accounts are alike because the proceeds avoid the probate process, the income tax consequences of each are completely different. The rules regarding the federal estate taxes associated with retirement accounts and the income tax consequences to your beneficiaries are covered in Chapter 16.
