What to Know About Choosing Your IRA Beneficiary

Couple reviewing the beneficiary designation on their IRAs

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Many people think a will can state how their individual retirement account (IRA) will be paid out. However, IRA accounts and other types of accounts like 401(k)s, 403(b)s, and 457s, have beneficiary designations attached to them.

Find out more about choosing who will receive your IRA and how these plans can pass on or be used by your heirs.

Key Takeaways

  • Your will cannot state how your IRA will be paid out, because the IRA overrides your will for the account.
  • Retirement accounts have forms for designating heirs, which you fill out when you open them.
  • You can name a trust as the heir of your IRA, but it must have special wording for it to be effective.
  • You can name minor children as your IRA heirs, but you'll need to appoint someone to manage the account until they reach the legal age.

Completing Beneficiary Designation Forms

When you open these accounts, you fill out forms, which are used to dictate how the money in the account will be dealt with upon your death. The names you put on your forms override what you have in your will or trust (if you have one).

One of the biggest mistakes made on IRA accounts is not naming someone as the heir. If you do not fill out the form or there are errors, the funds will be given out based on the custodial agreement defaults.

Naming a Spouse

Your spouse is the only person that can inherit your IRA and treat it like it is theirs. Spouses have a number of options when they inherit an IRA. They can roll it over into the IRA they have or leave it as an inherited IRA. If they keep it as an inherited IRA, they can withdraw from it as needed.

Once your spouse owns your IRA, they can name whomever they would like as their heirs. There is one worry many people have about their IRA when they die; the spouse they named might remarry and change the heirs in their IRA. If you had children with this spouse and named them as secondary beneficiaries, that spouse could change the beneficiaries upon the new marriage. This would leave your children out of the IRA altogether.

If you are married, trust that your spouse will follow your wishes, and have stable adult children, the best solution might be to name your spouse as your primary beneficiary and your children as contingents.


Some lawyers will draft a special conduit IRA trust to manage and distribute IRA assets. That may work better than naming a standard revocable living trust.

Naming a Trust

Frequently, some form of trust is named as the beneficiary of an IRA. This is done to protect the assets. The surviving spouse can use it as needed, but they won't be able to change your other beneficiaries. The goal here is to make sure the assets are given to the people you want them to go to, and that no one can change them.

If you name a trust as a beneficiary of your IRA, it must be drafted in a special way for it to be valid. If not done right, the IRA might be paid out on an accelerated schedule rather than letting each heir have the option to draw it out over their lifetime.

There is one downside to naming a trust—they need to be managed by someone who knows how. Many IRA accounts are not that large, and the trustee will likely want to be paid.

A trustee that oversees the management and distribution of your IRA and other assets can be costly. If they are paid from your small IRA, the account might empty too quickly for your heirs to benefit from it fully.


Trusts work better for someone with large IRAs and other assets the owner wants to be handled in a certain manner.

It may not be worth it to require that small accounts remain in the trust. Before you name a trust as the beneficiary, you should discuss it with a lawyer who is familiar with trust laws. That will help you see whether there is an option that can protect your assets for the people you want them to go to.

Naming Minors as Heirs

If you name minor children or grandchildren as direct heirs of your IRA, then your will must name someone to manage the assets on their behalf until they reach the age 18 or 21. The age in which they can receive them varies by state.

If you have a child with special needs or an adult child whom you don’t think should receive the assets outright, you may wish to set up a special needs trust on their behalf.

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  1. Hoopes, Adams & Scharber, PLC. "Beneficiary Designations Supersede Wills and Trusts."

  2. IRS. "Retirement Topics - Beneficiary."

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