Who Talks to My IRA Custodian When I Can’t?
IRA Custodians are important. They are the asset holder for your IRA and manage all of its activities, such as transfers, rollovers, contributions, and investments. Custodians are the facilitator for your IRA and also are responsible for reporting that data to the IRS. IRA custodians are usually banks or other financial institutions.
One major misconception people have, however, is that once they have established a trust that the IRA is included within that umbrella. Others think that because they have designated a beneficiary or are the beneficiary of an IRA that they can make decisions regarding the IRA. Neither of these situations are true and actually can become a big problem if you or your loved one is unable to communicate with the custodian of an IRA. IRAs cannot be included in Irrevocable Trusts because then the money would become susceptible to income taxes immediately. Beneficiaries are only the recipient of the IRA upon death of the creator of the IRA, but have no control of the IRA before that.
So who talks to your IRA custodian if you can’t? The answer is no one, unless you designate a Power of Attorney that has this ability. You need to establish a Power of Attorney that has the legal right to speak to your IRA custodian and direct your IRA account. Your Power of Attorney will also be able to maintain control of your IRA if you become mentally incapacitated. This is important because you may need to withdraw funds for care, something you or any of your family members will be unable to do if you are declared incapacitated.
One of the biggest things to be aware of when designating a Power of Attorney, however, is that it is an immense responsibility in terms of trust. Your Power of Attorney will have control over your IRA, so you need to make sure it is a responsible person that you trust implicitly.
If you have questions about what may happen to your IRA if you are unable to communicate with your IRA custodian, consult an attorney and go over your options. The main point is to not assume that your beneficiary, trustee, or family members will have access to direct your IRA.