It's important to make an informed decision when you designate a beneficiary for your IRAs and qualified plans.You can name your spouse(if applicable),another individual or an entity,such as a trust.Each of these alternatives has different consequences.

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Spouses are provided the greatest flexibility after your death.Your spouse can roll the assets over into an IRA,treat it as his or her own IRA from then on,opt to keep the assets in your plan until you would have reached age 701/2,or begin distributions.

Because of the marital deduction,your spouse will not owe estate taxes on the assets in your tax-deferred accounts when you die.(The marital deduction allows for the transfer of unlimited assets to the surviving spouse without triggering estate tax.)

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If you designate someone other than your spouse as the beneficiary of your tax deferred account,the rules are considerably less flexible.Depending on your age when you die,a nonspouse beneficiary may either take full distribution of the assets in the account by the end of the fifth year after your death,annuitize the balance and take distributions over the single life expectancy of the oldest beneficiary,or continue required minimum distributions.If you die after age 701/2,the payouts will be determined by the distribution elections you made.

A nonspouse beneficiary may not roll the assets into an IRA,and the value of the assets is included in your estate for estate tax purposes.

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An entity such as a trust,an estate or a charity must take distribution of the assets under the general rules of other nonspouse beneficiaries.However,an estate or a charity will not be able to recieve life expectancy payouts.Certain "qualifying trusts" permit payments over the life expectancy of the oldest beneficiary named in the trust,which can work well when the beneficiary is a child with a long life expectancy.It's important to be sure your trust is a qualifying trust if this distribution method appeals to you.

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Many people don't know they can split their IRAs into any number of new IRAs and name different beneficiaries for each.This statergy may be the answer when you begin mandatory distribution planning or you have a desire to leave your IRA to multiple beneficiaries.Talk with your financial consultant about this strategy.Be sure to consider the alternatives and exercise caution before you make that important beneficiary designation.If this information causes you to rethink your current designation,see tour tax adviser to discuss your alternatives.

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A credit shelter trust can enable both spouses to fully use their applicable credits against their estate tax obligations.(In 1999,the applicable credit is $211,300 and offsets estate tax on the first $650,000 of estate value.In 2000,the applicable credit increases to $220,550,offsetting an estate value of $675,000.)

Without credit shelter planning,the value of the assets of the first spouse to die often passes directly to the surviving spouse and the applicable credit of the deceased spouse is wasted.This is often a problem if the deceased spouse had a substantial tax-deferred balance while the surviving spouse has little or none.

One strategy you might consider is naming a revocable living trust with a credit shelter trust provision as beneficiary.You can allow the trustee to allocate benefits to the credit shelter trust as well as a marital trust,if provided for in the document.If you name your spouse as beneficiary of the trust,his or her life expectancy can be used to determine distribution to the trusts.

Alternatively,you may decide to name your spouse as primary beneficiary and a credit shelter trust as contingent beneficiary.Ask your legal advisor for assistance as you explore these approaches.