It’s Halloween season! This is the time for ghosts, witches, and trick or treating. What does Halloween have to do with your IRA? You might be surprised to hear that your IRA may be haunted. How can that be? Believe it or not, actions you take, or don’t take, can haunt your beneficiaries for years down the road.

Many IRA owners think that naming their estate as their IRA beneficiary is a good way to go. They think that they have spent time and money consulting with an attorney to draft the perfect will. All the work has been done. Why not just name their estate as their IRA beneficiary? Wrong move! That can result in scary stuff that can haunt your IRA beneficiaries. If you name your estate as the beneficiary on your IRA beneficiary designation form, your beneficiaries will not be able to stretch distributions over their own life expectancy. They may even have to take a total distribution of the IRA assets in five years. That could be a serious tax hit. There is no way to fix this after your death. To have the maximum stretch options possible, living people or a qualified trust must be named on the beneficiary designation form.

If you do not name a beneficiary on your IRA or you forget to update the beneficiary form after a big life event, your IRA may also be haunted. Your inaction could result in a scary tax situation for your heirs. If you do not bother to name a beneficiary, generally, the default beneficiary will apply and that is often the estate. That is not a good outcome. You could also end up in the same place if you do not update your beneficiary form after the death of a beneficiary. Failure to name a new beneficiary could result in all the funds going to your estate and the stretch being lost forever.

Failure to update your form after a major life event such as divorce or marIARge can result in an unintended person getting your IRA funds. To many people, there is no scarier story than an ex-spouse unintentionally ending up with all the retirement assets just because a form was not updated.

If these possibilities are spooking you, there is a solution. Your IRA does not have to be haunted. You can call the Ghostbusters right now. Simply contact your IRA custodian and check on your IRA beneficiary form. Who is your beneficiary? Is it the right person? Make any changes needed now. Your beneficiaries will be thanking you for sparing them from IRA horror stories later.