Resources > News>Inherited IRA Rules: Proper IRA Beneficiary Planning NOW Can Save Your Heirs Future Heartache

Inherited IRA Rules: Proper IRA Beneficiary Planning NOW Can Save Your Heirs Future Heartache

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Knowing the IRA Inherited Rules, Planning and Preparing Your Successor Are Critical For Your Success.

Video Highlights

[0:08] See what happens when an heir doesn’t understand self directed IRA rules.

[0:42] What do you need to tell your beneficiary?

[1:10] You also need to tell them who to talk to about your investments.

[1:39] Find out how Terry handles his family’s inheritance.

[2:14] Give your beneficiaries the contact info of trusted advisors who can help them.

[2:49] What is Sunwest Trust doing to help?

[3:02] Here’s a great example of the information you should leave.

[3:49] What about IRA hard to value assets?

[4:29] Be sure that you have instructions for each type of asset.

[4:50] What should you do with your list of inherited IRA guidelines?

[5:24] Don’t forget the most important thing!

[6:01] Remember to keep your information updated if you have any IRA beneficiary changes!

[6:30] Find out what to do if you have any other questions.

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We often get calls and emails from beneficiaries of accounts who have recently inherited the IRA (due to the original account holder’s death), concerning the next steps in regards to owning a new IRA. They’ve set up their Inherited IRA and have transferred the assets to their new account, but now what? Let’s say that the beneficiary owns a piece of real estate in their new IRA, but doesn’t know how to maintain or sell the property. Or, perhaps the beneficiary inherited gold through the IRA and isn’t sure how to value it. These are common occurrences, so today we’ll discuss sharing your goals with your loved ones and making a plan for the IRA’s succession.

Important Questions to Ask Yourself:

  • Have you told your beneficiaries that you have named them as your beneficiaries?
  • Have you told them where the IRA is held?
  • Do you have more than one IRA?
  • Do they know what’s in your IRA?
  • Do they know what to do with the assets once the account is theirs?

Does your IRA have beneficiaries? Do they know they’re beneficiaries?

For starters, it’s a good idea to inform your beneficiaries that they are, in fact, the beneficiary of your IRA. Sit them down, tell them that you have named them as the beneficiary of your account, and give them a brief description of what that means in the case of your death, either expectedly or unexpectedly. Your death may have a different impact on your beneficiaries if you die at 70, rather than if you pass away at 45 or 50, so it’s important to keep that in mind.

IRA Beneficiary Planning

Now that your beneficiaries are aware of their future endowment, it would be beneficial to also leave a few references that your beneficiary could have in case of your death to help liquidate or perhaps manage the assets. The reference sheet can be as simple as names and phone numbers or it can be as in depth as required. Maybe you could leave names, phone numbers, asset value and steps to liquidating each asset in your account. But it doesn’t have to be as detailed.

The point is that you can leave your beneficiaries with enough information to make your IRA a blessing and not a burden.

With a self directed IRA in particular, the assets held in the account can be specialized investments and, therefore, harder to liquidate and/or manage. Having a list of people you trust and respect to help your family in your absence will save tons of time and energy, not to mention the stress you will be saving them.

Note: The key to all of these actions is TRUST. Choose people you trust for your references. It might go without saying, but if you don’t trust an individual while you’re alive, how could you ever trust them when you’re gone? Money and a blind eye can change people quickly. So, just be aware of the people who you are bringing into your financial circle of trust.

In some cases, not all but some, the account holder doesn’t want the beneficiary to know he/she might receive a sum of money someday, for whatever reason. So, Sunwest Trust has decided to create a form to compile all the references for the account holders in one sheet. In the event of a death, and once Sunwest has received the death certificate, Sunwest will release the reference sheet to the beneficiary as a guide. Of course, you won’t be able to explain everything in this reference sheet, but, if nothing else, you can leave them with a few helpful clues. What they do with it after that is up to them.


As I talked about last week, we had a client call in (or actually email in) and she was the beneficiary of her spouse’s IRA and that particular IRA had a couple of LLCs in it.

She contacted us wanting to know what the LLCs were and what that investment was. Obviously, we didn’t necessarily know what the actual investment was, so there wasn’t a lot we could do for her. However, it made us think about how we could help these people. This video is basically a product from that email.

What we thought about is that a lot of times, we might name people beneficiaries on our IRAs. Did we even let them know that they’re the beneficiary? You may assume your spouse knows that she/he is the beneficiary of your IRA or your kids might be, but maybe you should sit down with them and explain the implications to them; that they are the beneficiary of your IRA and what that will actually mean when something happens to you.

And then the next thing to do, because of the nature of a self-directed IRA, these are not investments that they can normally just call their broker and sell and get cash and liquidate them if they want to.

These are typically going to be illiquid type investments and they’re likely to be specialized type investments where someone would have to know something about that particular investment; for instance, if it’s real estate or something like that.

Personally, I invest my IRA in real estate contracts. Here in New Mexico, you can purchase real estate contracts; that’s a mortgage on real property. My IRA is getting a monthly income from these various real estate contracts.

My wife is the beneficiary of my IRA, but my three boys also need to know what to do with those assets. If something were to happen to my wife and me at the same time, then they would be the beneficiary.

So between the four of them, my wife and my three boys, I’ve sat down with them and I’ve given them some names and contact information about people that I trust that understand cash flows like the investments that I have in my IRA–these are people that I trust. I tell them, “If something happens to me, you can call these people and they can help you decipher what we’ve got in the IRA and what you might do with it, just to give you some ideas.”

Now, obviously, this has to be someone you can fully trust.

This made us start thinking, here at Sunwest Trust, about what we could do to help you if something like this happens. Over the next month or so, we’re going to be developing a form that you can get on our website and you can fill it out. It’s just going to have basic information about the investments that you have in your IRA.

In other words, if I were to fill this out, I would put in there the real estate contracts that I’ve bought, my contact’s name, phone number, and state, “This is the person you can contact to talk about real estate contracts.”

If I’ve invested in something else, like gold, I might have a gold broker or dealer that I know. I might put his or her name and phone number in there and state, “For the gold that we have, this is somebody I trust. You can call them to sell the gold.”

If I have real estate (and I have at various times), I might have the name and phone number of a realtor that they could call that I trusted to help [my beneficiaries] out if something were to happen to me, or when something happens to me.

The other thing you might do is, if you’ re buying a particular investment, say a private placement, whatever it might be, to put the contact information for the person that you bought that investment from so that they could at least contact them.

The thing about this is that way, it doesn’t leave your beneficiary just wondering what you have, what to do with it, and how to take care of it. They’ve got some options to decide about how they’re going to take [care of] those investments (we talked about that last month). They might have some time, perhaps anywhere from a year to five years, so maybe their lifetime, depending on how they decide to handle that account.

They still need to be able to determine what the investments are, how they want to handle them and how to go forward from here.

Over the next month or so, watch our website, we’ll promote [this form] on our website. Again, it’s just going to be “who to call,” phone numbers, as well as contact information.

We’ll have that [form] and you can then instruct us, that, [in the event] something happens to you, if you still have an account with Sunwest Trust, we will then release that information to your beneficiaries. They will [then] have a concise list of who to call, to at least get a better understanding of what’s in your account, what type of investments are in your account, and how they can deal with those investments going forward.

This is something that I think is very important that we wanted to put in first, in this month-long series that we’re doing about taking care of your loved ones. Be sure you talk to your beneficiaries. Make sure they understand that they are beneficiaries.

If you can talk to them about who they should contact, maybe you can just do that verbally. Have a meeting with the people who are beneficiaries to let them know and give them all of the information right up front.

If you want to have it in a safe place, where they will be sure and get it when they go to take possession of the IRA, then watch our website for the form, fill that form out, and send it to us. We will scan it and have it there available for when your beneficiaries need it, and it’ll give them the information they need when the time comes.

Be sure that if you do that, do not forget to update it? That’s part of the problem with this stuff. Sometimes, I get really motivated, I sit down and write everything down and then two years later, I haven’t changed it. Be sure to update it; maybe what we can do is remind you, when you have to do your fair market value every year, that you need to update the information you want to give your beneficiaries.

We hope this is going to be really helpful. We’re excited about the opportunity of providing this service, which is something that you might not get anywhere else. We’re excited about putting this together. Keep your eyes on our website. If you have comments or questions, feel free to email us. If you have suggestions on ways we could implement this new idea, be sure to let us know. We look forward to doing it.

Terry White

About Terry White

I started my business career after getting my degree in Accounting from the University of New Mexico in 1983. My first job was as a controller for a local title company, and in 1987 I started First Financial Escrow, Inc. Over the years I played a part in several startup companies including First Financial Equities, Inc., First Financial Trust, Inc., First Financial Marketing, Inc. and Asset Ventures, Inc. In 1997 First Financial Escrow, Inc. was able to purchase the escrow accounts from Sunwest Bank and changed its name to Sunwest Escrow. As the market changes, Sunwest has grown and changed along with it. Besides my wife, Sheila, we have three boys, two daughters-in-law, one grandson, another grandson on the way and a future daughter-in-law. Sunwest is my passion, and I enjoy coming to work every day to see what will happen next. I enjoy fly fishing, spending time in Colorado, biking and watching my boys play soccer.