8 Ways to Avoid Probate, 5th edition 2004 by Mary Randolph

By Mary Randolph

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The Roth IRA is a whole different animal. Contributions are not tax-deductible. Income accumulates tax-free, however, as long as the contributions stay in the account at least five years. Most important, qualified withdrawals are not taxed. There are no mandatory lifetime withdrawals. A. Choosing a Beneficiary When you create an IRA or enroll in a 401(k) plan, the forms you fill out will ask you to name a beneficiary. You will probably also be given the opportunity to name an alternate (sometimes called “secondary” or “contingent”) beneficiary, who will inherit the money if your first choice dies before you do or at the same time.

Setting up a payable-on-death bank account is simple. When you open the account and fill out the bank’s forms, just list the beneficiary on the signature card. The bank may also ask you for some other information, such as the beneficiary’s address and birth date. D. payee,” doesn’t have to sign anything. Example: Magda wants to leave her two nieces some money. She opens a savings account at a local bank, deposits $10,000 in it, and names her two nieces as payable-on-death beneficiaries. After Magda’s death ten years later, they claim the money in the account—including the interest paid by the bank—without going through probate.

If your spouse agrees to sign the waiver, which should be provided by the firm that administers the 401(k) plan, a plan representative or a notary public must act as a witness. A prenuptial agreement can’t take the place of a waiver; the law says the spouse (not soon-to-bespouse) must sign. A spouse who does sign a waiver can withdraw that consent if the other spouse later names a different beneficiary, unless the signing spouse expressly gave up that right. ) Divorce. If you name your spouse as beneficiary of a 401(k) plan, pension plan, or employer-provided life insurance policy, and later divorce, a number of states have laws that automatically revoke your exspouse’s right to inherit.

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