Wills, trusts and powers of attorney are not the only things to consider when creating an estate plan. Some assets typically do not pass to New Jersey beneficiaries through a will. Life insurance policies, retirement accounts and IRA's all require beneficiary designations -- forms that are on file with the policy maker or account manager in case of death.
Many people leave their IRAs to their spouses or to a trust. When the owner of the account dies, he or she may prefer the proceeds from an IRA to go to that person's children or even a charity. It is possible to structure a beneficiary designation to give the primary beneficiary the choice.
A beneficiary may elect not to inherit, or disclaim, the account. Disclaiming treats the IRA as if the beneficiary has died. Therefore, the account would bypass the first beneficiary and go to the alternate.
Sometimes, there is more than one primary beneficiary for an IRA, and the account is then split between them. In this case, if a beneficiary elects not to inherit or dies before the account owner, some beneficiary designation forms allow for the share of that person to pass to that beneficiary's children instead of the other beneficiary receiving the whole account. The legal term for this is per stirpes.
Estate planning is all about providing for the future of both the person making the plan and his or her beneficiaries. Most contingencies can be accounted for, and when there is some doubt, an intended beneficiary may be given some freedom to do what is best for his or her family when the time comes to make a decision. New Jersey residents may also need to review their beneficiary designations periodically to be sure they are still in conformance with estate planning goals.
Source: Forbes, How To Leave Your IRA To Those You Love, Deborah L. Jacobs, Jan. 3, 2014