Beneficiary Designations
A Legal Moment

IRA & Life Insurance Beneficiary Designations: Time for a Tune-up?

   Reviewing Your Primary and Contingent Beneficiaries in Non-Probate Assets Can Make a Critical Difference Later.

   A substantial portion of a person’s assets may be governed by beneficiary designations rather than by the terms of that person's Will.  It is important to pay careful attention to beneficiary designations to make sure, in the event of your death, that your property is distributed according to your wishes.

Determine which of your assets are governed by beneficiary designations.

Retirement plans (IRAs, etc.) and life insurance policies are the most common examples of assets governed by beneficiary designations, and it is these two asset types to which this Legal Moment is directed.[i]
Do you know who your current beneficiaries are?

   Most people think they know who they have designated as their beneficiaries but, upon checking with their retirement plans or life insurance companies, some find they are mistaken. This is especially true when it comes to designations of contingent beneficiaries (the beneficiary named in case the primary beneficiary is predeceased).  Mistakes in designating primary beneficiaries also occur from time to time.
   Aside from the principal problem of assets not going to the intended beneficiary, for tax-qualified retirement plans like traditional IRAs, there can be hefty negative income tax consequences where no beneficiary is named — advantageous stretch-out periods for distributions may be lost.
Who should you name as beneficiaries?

   Beneficiary designations should be consistent with your overall estate plan and dispositive wishes.  For retirement plans, moreover, attention should be paid to the income tax implications of the designations.  For example, spouses typically name each other as primary beneficiary of their retirement plans — and this is often the optimal choice in terms of income tax impact.  But beyond that, there is little generalization to be made and each individual situation should be carefully examined.
Although life insurance designations are not generally subject to the income tax considerations of retirement plans, there are a number of other, non-tax beneficiary designation issues that warrant careful attention (e.g., avoidance of property passing to minors; making sure property would pass as desired under various potential scenarios).
For example, if you name your two children as beneficiaries, what happens if one of those children predeceases you?  Do you want that child’s portion to go to his or her children (your grandchildren), or do you intend that the policy proceeds all go to your surviving child?  The difference in outcomes hinges on the particular language contained in your beneficiary designation and/or the language of your insurance or retirement plan contract.
Should you name your revocable trust as a beneficiary?

   A revocable trust is often a good beneficiary choice for life insurance policies.  In certain situations, a revocable trust may be an appropriate choice for retirement plans, but because of income tax considerations, it may be preferable to name individual beneficiaries instead.  This is a complicated issue which does not lend itself to generalizations, and you should discuss this strategy with your estate planning professional.
When should beneficiary designations be reviewed?

   The following is a list of recommended times for review of your beneficiary designations:
  • At the death of a spouse or at the death of another family member or other person named as a beneficiary;
  • When you have a change in your marital, partner, or other relevant relationship;
  • When you have a change in your dispositive wishes—that is, a change regarding who it is you want to receive your assets;
  • When you are executing new estate planning documents;
  • When it has been awhile since you reviewed your designations; and
  • Now.
How do you review your designations?

   To check who is currently named as your primary and contingent beneficiaries, contact the custodian of your IRAs, the plan administrator of other retirement plans, and your life insurance companies.  Where multiple individuals are named as primary or contingent beneficiaries, carefully review what happens if one of those individuals predeceases you.  Changing your beneficiary designations is a matter of filling out “Change of Beneficiary” forms typically provided by the companies and plans with which you are doing business. After you make the change, it is advisable to request written confirmation from those companies that your requested change is in effect.
   The foregoing is a very simplified discussion of beneficiary designations, intended only to highlight the importance of paying attention to beneficiary designations to ensure they are up-to-date and reflect your wishes.  Many factors can affect the determination of these wishes, including the income tax considerations for retirement plans, and you should consult with your estate planning professional for recommendations with respect to your particular situation.

   If you are interested in making charitable bequests, please see an earlier Legal Moment article about the potential tax benefits of naming charities as beneficiaries of tax-qualified retirement plans.
[i]Other types of assets can also have beneficiary designations but those types are beyond the scope of this article.  Look for a discussion of “POD” (“Payable on Death”) and “TOD” (“Transfer on Death”) designations on bank accounts and other assets in a future Legal Moment.


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Gay Vinson is an attorney at Marshall, Roth & Gregory, PC. Her practice is concentrated in trust and estate planning and administration.
  To receive more information on this topic or to suggest topics for future editions of "A Legal Moment," feel free to contact Gay by email ( or telephone (828.281.2100). 

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     Other articles which may be of interest to you may be found in our Newsletter archives.

You may not rely on this content as legal advice for any specific situation, but should instead contact an attorney for specific advice.
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