Adding secondary beneficiaries to an IRA

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peterwfraser
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Joined: Mon Feb 17, 2014 10:59 pm

Adding secondary beneficiaries to an IRA

Post by peterwfraser »

I am in the process of generating a living trust, and tidying up my estate plan in general. I am structuring things so that my IRA investments are not dealt with in the trust, but are distributed by declaring beneficiaries. My IRAs are shared unequally between three primary beneficiaries. If one or more of the beneficiaries dies before I do, and I don't change the primary beneficiaries accordingly (I know I should), what happens do the dead person's share? I'm with Vanguard, and it's not obvious by looking at their web site. I tried calling, but got tired of waiting on hold.
Topic Author
peterwfraser
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Re: Adding secondary beneficiaries to an IRA

Post by peterwfraser »

I did try to see if I could use the secondary beneficiaries feature to make sensible things happen, but it doesn't seem appropriate to multiple primary beneficiaries.
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Lee_WSP
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Re: Adding secondary beneficiaries to an IRA

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FIREchief
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Re: Adding secondary beneficiaries to an IRA

Post by FIREchief »

peterwfraser wrote: Fri Jun 11, 2021 1:14 pm I am structuring things so that my IRA investments are not dealt with in the trust, but are distributed by declaring beneficiaries. My IRAs are shared unequally between three primary beneficiaries. If one or more of the beneficiaries dies before I do, and I don't change the primary beneficiaries accordingly (I know I should), what happens do the dead person's share?
If any of the deceased beneficiaries were designated "per stirpes," than their share would go to their heirs. If not, I believe it would go proportionally to the remaining living beneficiaries. See my signature.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Katietsu
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Re: Adding secondary beneficiaries to an IRA

Post by Katietsu »

Do you have multiple primary beneficiaries? If so, the way my IRA, not at Vanguard, works is that the secondary beneficiaries are irrelevant unless ALL of the primary beneficiaries pre decease you (or disclaim). If one of three primary beneficiaries pre deceased me, the other two would share the proceeds proportionally to their share. For example, primary beneficiaries are: Susan 25%, Bob 25% and Tim 50%. Susan dies before me. Bob gets 1/3 and Tim gets 2/3.

I have learned on BH that IRA’s from different brokerages can have language that can change the outcome though. And I have just addressed the simplest situation. I have contemplated more complex beneficiary arrangements.
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RickBoglehead
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Re: Adding secondary beneficiaries to an IRA

Post by RickBoglehead »

FIREchief wrote: Fri Jun 11, 2021 1:44 pm
peterwfraser wrote: Fri Jun 11, 2021 1:14 pm I am structuring things so that my IRA investments are not dealt with in the trust, but are distributed by declaring beneficiaries. My IRAs are shared unequally between three primary beneficiaries. If one or more of the beneficiaries dies before I do, and I don't change the primary beneficiaries accordingly (I know I should), what happens do the dead person's share?
If any of the deceased beneficiaries were designated "per stirpes," than their share would go to their heirs. If not, I believe it would go proportionally to the remaining living beneficiaries. See my signature.
I agree with this conclusion.
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Topic Author
peterwfraser
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Re: Adding secondary beneficiaries to an IRA

Post by peterwfraser »

Excellent. Thanks to everyone for the advice.
bsteiner
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Re: Adding secondary beneficiaries to an IRA

Post by bsteiner »

It depends on what you say in the beneficiary designation form (or in a rider to it).

If you're providing for children, you would likely want the share of a deceased child to go to (or in trust for) that child's issue.

However, if you were providing for cousins or friends, you might (or might not) want the share of one who's deceased to be divided among the ones who survive rather than to the deceased one's issue.

Make sure your beneficiary designation form (or the rider to it) is clear as to who gets what.
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GerryL
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Re: Adding secondary beneficiaries to an IRA

Post by GerryL »

I was having a problem using the online for to designate beneficiaries for my Roth at Vanguard. Half to a charity and half to my nephew. I wanted to put a secondary beneficiary in case my nephew predeceases me, but the form wouldn't let me do it unless I indicated a secondary for the other half. Not appropriate. I wrote to Vanguard and they said I needed to do this with a letter. The online tool is not up to the task.
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