How to Designate an IRA Beneficiary
Selecting a beneficiary is an important decision in your retirement planning. In fact, some firms will not allow you to even open an Individual Retirement Account (IRA), unless you complete the beneficiary designation form. Part of the reason for this is that upon your death, if you have no listed beneficiary, your IRA account will go into probate and may not be distributed per your wishes.
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Instructions
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Choose an appropriate heir. In order to satisfy legal requirements, your heir must be over the age of 18. Additionally, if you are married and live in a community property state, your beneficiary must be your wife, unless she provides written authorization rejecting her status as beneficiary. Beyond that, you can choose anyone you like as a beneficiary. You should also consider choosing a secondary, or "contingent," beneficiary, in case your primary beneficiary should predecease you. You are also allowed to choose multiple beneficiaries. In this case, you can assign whatever percentage amount you would like to each beneficiary, as long as the total amount assigned adds up to 100 percent.
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Contact your financial services company. Once you have chosen your beneficiary, you will have to fill out paperwork that varies from company to company outlining specific details about your beneficiary. Specifically, at the very least you will be asked for your beneficiary's full name and address, social security number, date of birth, and the relationship between the two of you. While you are not required to inform your beneficiary of your choice, it is generally a good idea to ask for permission to use her social security number. Additionally, informing a beneficiary often facilitates the account transfer upon your death.
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Verify that your designation is recorded properly. Once you have filled out your paperwork, double-check that your financial services firm has the correct name, address, and social security number of your beneficiary on file. Following up is important with IRA beneficiary designations because if you pass away before the error is corrected, it may prove difficult to pass your assets to your intended heir.
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Tips & Warnings
Many firms will list your beneficiary on your monthly account statement, but if not, you may want to request an annual printout showing your designated beneficiary.
