What’s the Best Way to Leave IRAs to Non-U.S. Beneficiaries?

 In Non-US Citizens, Retirement Plans
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Photo by Cris Tagupa on Unsplash

Question:

I would like to leave my 401k, IRAs, etc. to my family in the Philippines. What is the best and easiest way to do this? Should I show them as beneficiaries or should I just have a living trust that states that all my assets will go to them (no properties involved)?

Response:

In principle, you should be able to name your family as direct beneficiaries of your retirement plans, but it could make life easier for them if you used a trust. You don’t say whether they’re United States citizens, but I’ll assume they’re not. As a result, the distributions would be subject to 30% withholding, which could be paid out to them upon the filing of an income tax return. In addition, they would have to have their own Social Security numbers.

For these reasons, and because dealing with U.S. investment companies from overseas can be difficult, a revocable trust with a U.S.-based trustee might make the most sense. Further, with passage of the SECURE Act at the end of last year, the disadvantages of using a trust are not so great as they used to be. A trust has to pass through certain hoops to be deemed a designated beneficiary and be able to stretch withdrawals out over the oldest beneficiary’s lifetime. But now, under the SECURE Act, the longest stretch is five years for everyone, so the loss of the longer stretch  would not be so costly.

 

Related Articles:

When You May Want Retirement Plans to be Payable to Trusts

Treatment of Inherited IRAs

The Basic Rules of Retirement Plans Before and After the SECURE Act

Showing 3 comments
  • Esjay
    Reply

    I am non us citizen and have a friend from US who was died last year he has children but hes divorce..before he died he told me that he already added me as his beneficiary…but he never gave me any details about his ensurance,i dont know where to reach out.and one of his friend told me that no one any of my decease friends children was listed as the beneficiary ..does the insurance company will contact me if i am really the beneficiary?

      • Harry Margolis
        Reply

        Esjay,
        That’s a difficult situation. The insurance company is unlikely to contact you. Typically, they wait until beneficiaries present claims. Your best bet is to reach out to the family. You could also see if a probate has been filed in the county where your friend lived when he died. If it has, you can find out who is serving as his executor or personal representative and contact him or her.
        Harry

      • Esjay
        Reply

        And someone told told me that his children calls for a lawyer To contest through legal action..hmm i think i really dont have power for this matter and maybe the court overturn the beneficiary and give the favor to them…

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