As his experience with Fidelity Investments shows, it's a good idea to know ahead of time how the company that handles your retirement money will react if you are incapacitated and need someone else to control your account. Davidson and his wife, Margaret, own a home in Houston and have a joint bank account. However, their main asset is Davidson's individual retirement account, which is in his name alone. If he were to die, his IRA money would go directly to Margaret, who is the named beneficiary. However, if he were felled by Alzheimer's, a serious stroke or some other disabling illness, their finances would be in legal limbo.
Fidelity acts in a fiduciary capacity for the customer as a custodian.
In that one-time transaction, Margaret could take all the money out of the retirement account, Davidson was told. But, if she did, she'd have to pay tax on the entire sum in a single year. Or, she could elect to receive regular distributions from the account. However, if she later decided that she needed additional funds or needed to change the distribution formula, she'd have a problem. Margaret's only other option in the event of her husband's incapacity would be to go to court to be appointed his trustee, conservator or legal guardian.