CEA Beneficiary Designations & Account Titling Flashcards
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Read the first 6 CEA Beneficiary Designations & Account Titling flashcards as text
A 'disclaimer' allows a beneficiary to:
Answer: Refuse an inheritance so it passes to the next beneficiary
A qualified disclaimer under IRC Section 2518 allows a beneficiary to refuse assets, which then pass as if the disclaimant had predeceased the decedent.
Which retirement account type allows a surviving spouse to roll over inherited assets and treat the IRA as their own?
Answer: Traditional IRA and Roth IRA
Surviving spouses have the unique option to roll over an inherited traditional or Roth IRA into their own IRA, allowing continued tax-deferred growth under their own RMD schedule.
What happens to an IRA with no named beneficiary if the account owner dies?
Answer: The IRA passes per the financial institution's default rules, often to the estate
Without a named beneficiary, the IRA typically passes to the account owner's estate, triggering probate and often requiring a shorter 5-year distribution period.
In which scenario does the 'step-up in basis' most benefit a beneficiary?
Answer: The inherited asset has significantly appreciated since the original owner's purchase
A step-up in basis resets the asset's cost basis to fair market value at death, eliminating capital gains tax on appreciation that occurred during the decedent's lifetime.
A 'TOD' (Transfer on Death) registration on a brokerage account is most similar in function to which account feature on a bank account?
Answer: A POD (Payable on Death) designation
Both TOD on brokerage accounts and POD on bank accounts are beneficiary designations that transfer assets directly to named individuals at the account owner's death, bypassing probate.
An estate planner recommends that a client name a minor child as direct beneficiary of a large life insurance policy. What is the primary risk?
Answer: A court may appoint a guardian of the property to manage the funds
Minors cannot legally manage large sums, so a court typically appoints a guardian of the property, which can be costly and may not reflect the parent's wishes.