Brenda Vingiello, Sand Hill’s Chief Investment Officer, joined Squawk Box to discuss her thoughts on the latest market trends and market outlook for 2025. This
An Optimal Approach to Beneficiary Designations and Your Children
Published Date : October 29, 2024
At Sand Hill, we work with multi-generational families and one request that we sometimes see from clients is a preference to name minor children as account beneficiaries. Unfortunately, minors are legally unable to own property; therefore, they cannot inherit investment assets in their own name. Naming minors outright will lead to unnecessary complications for their legal guardian and delay the transfer of the assets to your intended recipient. Fortunately, there is an effective way to pass investment assets to your minor children, and it all has to do with how the beneficiary designation is worded. These designations can be applied to both retirement accounts such as IRAs and Roth IRAs, as well as taxable investment accounts, such as individual or joint accounts.
In the absence of an executed estate plan, transfer-on-death (TOD) designations have become more common today for individual and joint brokerage accounts. They are considered a simple solution to avoiding the probate process if the account owner passes away without an estate plan or revocable living trust in place. For investors with an individual or joint brokerage account, they can designate one or multiple beneficiaries to receive the account assets at death. But keep in mind, the complexities surrounding minor beneficiary designations on retirement accounts also apply to TOD-designated accounts.
Historically, bequeathing retirement assets to minor children or grandchildren has been a successful tool to pass wealth to future generations, as required distributions from those inherited IRA accounts could be “stretched” over the course of that young person’s lifetime. Today, this is no longer the case with the passing of the SECURE Act in 2019, which mandates fully distributing inherited IRA assets within 10 years of the original account owner’s death. Children of the IRA owner may fall under the “special rule for minor children” in which minors will be allowed to take age-based distributions until they reach the age of majority, and then the 10-year rule will kick in. Per the IRS’s 2024 clarification of the SECURE Act 1.0 and 2.0, the age of majority is 21.
In some cases, naming a minor as beneficiary is a necessity because you simply have no other option. When completing a TOD designation or IRA beneficiary form, it is essential to name the adult(s) who will act as that minor’s guardian(s) for the assets. The legal guardian will be charged with managing the inherited IRA or taxable custodial account on the minor’s behalf until they reach the age of majority. If you fail to identify a guardian for the minor, the account custodian will require further documentation—such as a court order—stipulating who has been appointed as guardian. Therefore, to maintain as much control as possible, it is best to identify the guardian in advance.
As a general rule of thumb, account beneficiaries should be reviewed on a regular basis to ensure the listed parties are still in keeping with the account owner’s wishes. As life circumstances change, so too could your plan for who will inherit your brokerage or retirement assets. Beneficiary designations can be changed at any time and your team at Sand Hill is happy to review your current beneficiary designations with you and coordinate any updates as needed.
Source: IRS
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Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
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All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
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