Most Oklahoma grandparents would do anything in the world for their grandchildren. It's not unusual for them to be included in grandma's and grandpa's wills. But if financial security well into their futures is a concern, elders might wish to investigate whether funding an IRA is the way to go.
In some circumstances, a strong financial foundation can be built for young children through individual retirement account payments. Heirs would need to take minimum distributions from either a traditional or Roth IRA over the course of their lives. Experts advise that for a young beneficiary, the account could grow tax-sheltered for many years.
Precautions that will protect the legacy need to be carefully considered when choosing which options suit your situation. For example, a minor child can't inherit an IRA outright. A custodian could be appointed to oversee the account until adulthood is attained. Alternatively, the account could be left to a trust. This option allows grandparents some control over how the money is used by heirs.
Another thing to think about is that, unless a trust is involved, grandchildren will have access to the money at age 18 or 21, depending on the state where they reside. To eliminate concern that the money isn't being used as you intended - such as for college or scheduled withdrawals over their lifetimes - a trust can be the beneficiary. The minor child is then a beneficiary of the trust you have set up as you see fit.
There are numerous, creative ways to protect both your legacy and your heirs. Gaining a clear understanding of options available will assure inheritance issues are minimized for your family. Careful planning can result in your loved ones' well-managed financial futures.
Source: Kiplinger, "Pass an IRA to Young Grandkids with Care" Rachel L. Sheedy, Jan. 14, 2014