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Key considerations when choosing your IRA beneficiaries

This guide shares insights about who may be a beneficiary of your IRA account.

Updated over a week ago

When setting up your Guideline IRA you will be provided the opportunity to designate one or more beneficiaries for your account. Beneficiaries are people or entities that will inherit your IRA account when you pass away. You can elect as many individuals or entities as you choose as long as the total percentage of all designations equals 100%.

Although choosing a beneficiary is not required, doing so ensures your IRA account is allocated per your wishes.

Primary vs. contingent beneficiaries

Primary beneficiary

A primary beneficiary is the first in line to inherit your funds in the event of your passing. You can designate multiple primary beneficiaries and specify the percentage of the account each should receive.

If any primary beneficiary dies before you or chooses to disclaim their right to the IRA, their share will be divided between any remaining primary beneficiaries.

Contingent beneficiary

A contingent or secondary beneficiary can be elected as a backup, in the event all of your primary beneficiaries are deceased or unable to receive your funds. Like primary beneficiaries, you can designate multiple contingent beneficiaries and specify the percentage each should receive.

How marital status impacts your beneficiaries

If you’re married

State laws often have specific regulations regarding beneficiary designations involving spouses. In community property states, designating someone else as your primary beneficiary requires your spouse's notarized written consent.​

If you’re single

As a single individual, you can designate any person or entity as your beneficiary. However, if you become married and live in a community property state, any prior beneficiary designations will become invalid, and your spouse will be the primary beneficiary.

If you get married but do not live in a community property state, your existing designations remain valid. To designate your spouse as the primary beneficiary in this case, you will need to update your beneficiary in your Guideline dashboard.

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Other beneficiary considerations

Minor beneficiary

It is permitted to name a minor as a beneficiary to your IRA. However, it’s important to note that if the minor beneficiary has not turned 18 prior to inheriting your IRA, a court of law must appoint a guardian to make decisions regarding the account on behalf of the minor.

Trust beneficiary

If you choose to designate a trust as your beneficiary, you may wish to ensure the trust meets legal requirements to be a qualified see-through trust. Doing so can allow for the most flexible distribution options for the underlying beneficiaries.

For a trust to be qualified, it must meet the following requirements:

  1. Be valid under state law,

  2. Is, or becomes, irrevocable upon the death of the IRA owner,

  3. All beneficiaries of the trust must be identifiable, and

  4. The IRA custodian must receive a copy of the trust document no later than October 31 of the year following the IRA account owner’s death.​

Non-person beneficiary

You can choose to designate a non-person, such as a church, charitable organization, estate, or nonqualified trust, as a beneficiary.

We should contact your tax advisor for more information on adding a non-person as a beneficiary of your IRA account.

What happens if no beneficiary is listed

If you do not designate a beneficiary for your IRA, your IRA agreement will determine who is the beneficiary of your account.

At Guideline, your IRA would be distributed in the following order:

  1. Surviving spouse

  2. Your estate (if no surviving spouse)

Be sure to visit your Guideline dashboard if you haven’t updated your account information recently or if recent circumstances warrant an update to your beneficiary designations. You can find tips for keeping your beneficiaries up to date here.

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