An inherited IRA will pass to beneficiaries under the terms of
the contract the account owner has signed with the IRA
custodian. Such a contract typically overrides anything
spelled out in a will or a trust. Thus, a simple mistake on
this document can ruin your entire estate plan.
What’s more, IRA custodians generally are governed by
state law, in terms of the contracts into which they can
enter. That’s especially true with banks and credit unions,
which act as IRA custodians for millions of Americans.
If you plan on opening an IRA with your local bank, for
example, remember that you’ll be dealing with bank
personnel. The person opening your account might be a new
employee, one who was working at a retailer just a few
weeks earlier. Therefore, although you can hope for the
best, you must realize you may be working with someone
who literally doesn’t know a primary from a contingent
beneficiary.
The better prepared you are, the more likely you’ll
wind up with a satisfactory arrangement. Know exactly how
you’d like your IRA to be distributed, at your death.