Question about Beneficiaries on IRA's

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oneleaf
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Question about Beneficiaries on IRA's

Post by oneleaf »

So I am reviewing my beneficiary choices on our accounts. I see that the default for primary beneficiary is to the Spouse who survives the account holder. However, I decided to change it to a named beneficiary, naming my spouse by name, clicking the button for spouse and adding her birthday as requested. I figured this is better than the default (provided I stay on top of this and change the spouse's name if I ever needed to), since it would be easier for Vanguard to verify the beneficiary. Is this a good assumption?

I also put in the name like this: FIRST_NAME MIDDLE_INITIAL LAST_NAME (i.e. Jane E Smith)

I assume this is acceptable and adequate practice given my desire for her to be clearly named and to have the transfer be as easy as possible upon my death?

Thanks!
livesoft
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Re: Question about Beneficiaries on IRA's

Post by livesoft »

Wow, I didn't know that "Spouse" could be used for these things at all. All our accounts have named beneficiaries. We don't even do the "per stirpes" things.
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jebmke
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Re: Question about Beneficiaries on IRA's

Post by jebmke »

Mine say something like "The spouse to whom I am married at the time of my death." I guess that is to avoid any confusion that a former spouse (not that I have any) would come forward and claim that she was "the spouse" at the time of beneficiary declaration.
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midareff
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Re: Question about Beneficiaries on IRA's

Post by midareff »

jebmke wrote:Mine say something like "The spouse to whom I am married at the time of my death." I guess that is to avoid any confusion that a former spouse (not that I have any) would come forward and claim that she was "the spouse" at the time of beneficiary declaration.

Don't like that one at all..... probably works OK through mid-life. You get a bit shaky mentally in your more senior years and remarry not to be alone and the kids by #1 get bypassed. I'm much more a fan of the named beneficiaries and having an up to date will. I have used the terminology "Under Will" see (attorney of record) in some cases.
livesoft
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Re: Question about Beneficiaries on IRA's

Post by livesoft »

My neighbor had a secret family, so he was married to two spouses at the same time. He probably had his 401(k) set up correctly though since he worked for a 401(k) company. :twisted:
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oneleaf
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Re: Question about Beneficiaries on IRA's

Post by oneleaf »

midareff wrote:
jebmke wrote:Mine say something like "The spouse to whom I am married at the time of my death." I guess that is to avoid any confusion that a former spouse (not that I have any) would come forward and claim that she was "the spouse" at the time of beneficiary declaration.

Don't like that one at all..... probably works OK through mid-life. You get a bit shaky mentally in your more senior years and remarry not to be alone and the kids by #1 get bypassed. I'm much more a fan of the named beneficiaries and having an up to date will. I have used the terminology "Under Will" see (attorney of record) in some cases.
Yea this what I am worried about too.
Were you able to add "Under Will" in your beneficiary designation? I know that for secondary beneficiaries, some people here have mentioned naming children instead of the standard "to my descendents", but they also added PER STIRPES after each name. But Vanguard's beneficiary kit specifically mentions that naming beneficiaries by name have no PER STIRPES clause whereas naming them by relation does. This always worried me, so I kept the secondary beneficiaries by relation (to my descendents who survive me per stirpes).
Bill M
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Re: Question about Beneficiaries on IRA's

Post by Bill M »

One additional consideration -- while IRAs pass to the beneficiary without going through probate, if your beneficiary is not given as an easily-identified person (such as, instead of a full name, beneficiary is given as some variant on "my spouse", or "descendents per stirpees"), the custodian will likely only accept information from the executor of the estate identifying that person. So someone will still have to file the will, pay the probate court fees, legal fees, etc, just to get the IRA distributed.
Last edited by Bill M on Thu Mar 05, 2015 3:47 pm, edited 1 time in total.
Alan S.
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Re: Question about Beneficiaries on IRA's

Post by Alan S. »

The last thing you want to do is refer to your will to determine the beneficiary. Not only will the IRA become subject to probating the will, but the individual will NOT be considered a designated beneficiary, and the life expectancy stretch will be destroyed. Here are the IRS Regs: https://www.law.cornell.edu/cfr/text/26 ... 9%289%29-4

Note that these restrictions do not apply to qualified trusts, eg you could name a specific trust as the beneficiary or even a testamentary trust created by the will and if the trust is qualified, the life expectancy of the oldest trust beneficiary will apply to RMDs. Not so when your estate becomes the beneficiary, and your will beneficiary would have to drain the IRA under the 5 year rule if owner passed prior to the required beginning date.

"My spouse" or "my children" is acceptable as a designated beneficiary since the beneficiary is determinable. But that does not mean it is easily determinable in cases of adoptions, foster children, two spouses etc. State law would come into play and it could take time to determine who the beneficiaries actually are in complex situations. Accordingly, it is generally better to specifically name the individual unless you are completely sure there are no gray areas in the identification process.
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