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Leaving your IRA to your estate
Do not-repeat, do not-name your estate as your individual retirement account beneficiary or it will be subject to claims and creditors during probate, the legal process for settling your estate.
When you die, your individual retirement account would be used to pay off any debts in your name. Whatever money remains, if any, gets distributed to your heirs-and not in a timely fashion. Probate is costly and can take years to complete.
“If the deceased had bad credit card debt or is upside down on a loan, the entire IRA could be used up,” said certified financial planner and estate lawyer Austin Frye, founder and president of Frye Financial Center.
However, naming a live person-or all of your children equally-instead as the IRA beneficiary allows those assets to pass outside of probate free and clear, away from hungry creditors, Frye said.