While a will is a very important document that handles how many of an individual's assets will be distributed after their passing, an individual retirement account is not one of those assets. An IRA's distribution is instead governed by a beneficiary designation form filled out the account is originally opened. It is prudent for Maryland residents to periodically check these designations to ensure that they are current.
An IRA's beneficiary can be anyone the account holder designates, regardless of the relationship or who is designated in the owner's will. In contrast, a married owner of a 401(k) or similar employer-sponsored plan must obtain the permission of the spouse to leave it to another beneficiary.
Naming one's own estate as the beneficiary may seem like a reasonable move, to allow it to be distributed with the remainder of the estate. However, doing so can eliminate many of the tax benefits that are gained by investing in a retirement account in the first place. If no beneficiary form is on file, the distribution will be governed by the default policy of the entity that holds the funds. This default beneficiary is most frequently the owner's spouse.
Ensuring that one's property is distributed to those recipients that are intended by the decedent can require diligence and careful planning. There are many types of assets in addition to individual retirement accounts that are governed by beneficiary designations instead of will provisions and that consequently pass outside of the probate process. It is therefore suggested that estate planning documents be periodically reviewed and appropriately updated or revised if changing circumstances so dictate.