Don't Give Your Nest Egg to Uncle Sam

Step 2. Checklists

The next step is creating a beneficiary checklist. This is important, he notes, not only after your death, but because it could affect the required minimum distributions you must take during your lifetime, and thus the amount left to your heirs. It's important to update this list if your marital status changes or if one of your beneficiaries precedes you in death. The beneficiary document, Slott points out, "trumps all other documents, including a will, in determining where the money goes after you die."

Other issues to consider: Are two people "co-beneficiaries" or is one a primary beneficiary? Have you named a "contingent" beneficiary in case one predeceases or disclaims the inheritance? If one beneficiary dies is that person's share distributed "per stirpes" to his or her children?

Step 3. Legal Issues

It's important to check the rules of your company plan or IRA custodian. Some have rigid rules and will not allow lifetime payments to be made to a young beneficiary. Some won't allow the beneficiary to transfer assets to a different custodian. Some won't acknowledge a trust as a beneficiary.

Slott's book covers the new rules that are just going into effect for direct rollovers from company retirement plans to "Inherited IRAs" -- a specific procedure that must be followed to stretch out the growth and ultimate withdrawals from an IRA that is not inherited by a spouse.