FAQs – IRA Beneficiary Designations
Can I name more than one beneficiary for my IRA?
Under most circumstances, you may name multiple beneficiaries for your IRA. Under most circumstance, if you name multiple primary beneficiaries on your IRA, each primary beneficiary who is alive at the time of your death will receive a portion of your IRA.
Must I name a beneficiary specifically for my IRA?
Technically, you are not required by law to name individual beneficiaries specific to your IRA. However, if you do not explicitly name one or more beneficiaries for your IRA (on documents provided by your IRA provider), you run the potential risk of having your IRA assets paid to individuals other than those whom you intended. You should refer to the terms of your IRA document to see how your IRA assets will be distributed upon your death in a situation where there is not a proper IRA beneficiary designation on file.
What is a contingent beneficiary, and why should I consider naming a contingent beneficiary for my IRA?
Although the specific terms governing contingent beneficiaries can vary, the term contingent beneficiary generally refers to a beneficiary who will only be eligible to receive the assets of your IRA upon your death if your primary beneficiary(ies) has predeceased you. Most IRA providers will allow you to name one or more contingent beneficiaries in addition to your primary beneficiaries. Naming one or more contingent beneficiaries on your IRA can be a good 'backup plan' in the event you should forget to update your beneficiary designation upon the death of one of your primary beneficiaries. Before naming contingent beneficiaries, however, be sure your read the terms of the beneficiary designation form carefully to make sure you understand the circumstances under which the contingent beneficiary will be eligible to receive IRA proceeds.
Is spousal consent required on a beneficiary designation in some states?
Some states have adopted community property or marital property laws which require you to obtain written spousal consent when naming someone other than your spouse as the primary beneficiary of your IRA. If you live in a state that has such laws (or, if your IRA is maintained in such a state), you should familiarize yourself with the spousal consent requirements prior to naming someone other than your spouse as the primary beneficiary of your IRA. Examples of states that have adopted community property or marital property laws include Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
Can I name a charitable institution as my IRA beneficiary?
Yes. Under most IRA plans, you are permitted to name any individual or entity you desire as the beneficiary of your IRA.
Can my overall estate planning strategy be significantly affected by my IRA beneficiary designation(s)?
Your selection of whom you will name as your primary and contingent IRA beneficiaries can significantly impact your overall estate planning strategy. A comprehensive estate planning strategy will take into account your IRA assets and their unique impact on your overall estate.
Are there any potential drawbacks to simply naming my estate as the beneficiary of my IRA?
While it is permissible to name your estate as the beneficiary of your IRA, doing so will generally subject your IRA assets to probate, a situation that is generally avoided by naming a specific individual or individuals as the beneficiary(ies) of your IRA.
This information is not intended to be legal or tax advice. Please consult a tax, legal, or financial professional with questions.
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