Many Americans have one or more IRAs (Individual Retirement Accounts) that form an important part of their retirement plans. But that also means your IRA is an important part of your estate plan. Who should receive it? Here are a few beneficiaries you might consider leaving it to in your will and why.

1. Minor Children/Grandchildren

With the coming of the SECURE Act in 2019, non-spousal beneficiaries generally have to withdraw the entire IRA within 10 years of inheriting it. This, though, means that they pay income taxes on the money. And that adds up. 

Minors, however, are an exception to the rule. While they are still subject to this 10-year time frame, in the long run, the clock doesn't start with your death. Instead, they have until a decade after they reach the age of 18. Depending on the child's age, this could provide many years of tax-free growth.  

2. Your Spouse/Partner

The surviving spouse is one of the most common beneficiaries of inherited IRAs for good reason. Not only is this a good way to care for your partner, but they are also one of the few individuals who can let that IRA continue to grow for many years.  

Spouses generally only begin taking required minimum distributions on the same schedule as they would if the IRA were their own. Not married to your partner? A partner who is less than 10 years younger than you may also be able to use the IRS spousal rules. 

3. A Disabled Relative

Do you have someone in your life with a disability whom you want to provide for? Then the IRA might be a good vehicle to do so. As with spouses, persons with a disability or chronic illness may also be exempt from the 10-year rule.

4. Charitable Organizations

Most people want to leave something to charitable causes as a legacy. If you're one of them, consider the benefit of leaving some or all of an IRA to a charity. 

Charitable contributions qualify for a number of tax breaks that reduce the potential taxability of your estate. And a qualifying charity is not subject to the 10-year withdrawal requirement, so they have flexibility about how to use the funds. 

Where to Start

Should you leave your IRA to one of these beneficiaries? Should you do something more proactive with it, such as converting it to a tax-free Roth IRA while you're alive? Find out by meeting with an estate planner in your state today. 

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