IRA beneficiary designations

Why it's important to choose wisely

The beneficiary designations on your retirement account generally supersede any other instructions—even those in your will. You may want to consult with an estate attorney before you decide. The beneficiaries you designate will completely replace previous beneficiary designations on all fund accounts for the IRA types you specify. Therefore, be sure to complete the entire form, even if you are changing only a part of your designation. You may update your beneficiaries at any time, but your designations are irrevocable after your death.

The difference between primary and secondary beneficiaries

Primary. Your primary beneficiary is the individual or individuals, trust, charity, or other party you designate to receive your assets after your death. If any of your primary beneficiaries is deceased at the time of your death, his or her portion of your assets will be divided proportionately among your surviving primary beneficiaries, if any, unless you choose the option, "To my descendants who survive me, per stirpes" as your primary beneficiary.

Secondary. Your secondary beneficiary or beneficiaries will inherit your assets only if you have no surviving primary beneficiaries at the time of your death.

Why you should designate both primary and secondary beneficiaries. If you have not designated secondary beneficiaries and your primary beneficiary or beneficiaries die before you, your assets may pass to your estate, depending on the terms of your IRA. Your assets could be subject to costs and delays that may accompany settlement of your estate, and your beneficiaries may be subject to adverse tax consequences.

Points to consider in choosing your beneficiary designations

Your designation usually supersedes any other instructions, such as those in your will.
If a surviving spouse is your sole beneficiary, he or she may have options that are not available to nonspouse beneficiaries.
Your beneficiary designations should work with your other estate planning tools, such as trusts.
If you are considering the designation of your estate as beneficiary, there may be disadvantages, such as higher income taxes for your heirs and settlement costs.
After you've made your designations, you should review them whenever a major event occurs—for instance, marriage, divorce, or the birth of a child.

The responsibilities of your beneficiaries

Upon your death, your beneficiaries will need to provide information and documentation to Vanguard before we can distribute your assets. You should discuss your designations with your beneficiaries to ensure that they are aware of their responsibility for notifying Vanguard of your death.

Your beneficiary designation options

You can choose one or more of the following designations. Indicate the percentage of assets that you want to allocate for each beneficiary, ensuring that the total equals 100%.

My spouse

If you designate your spouse, you may choose one of two options (do not select both options, as that could result in more than one beneficiary receiving assets):

"To the person named here." You need to identify your spouse by providing his or her name. However, if your spouse changes, you will need to update the name. Otherwise, the person identified by name will inherit your assets.

"To the person I am married to at the time of my death." In this case, you do not need to provide your spouse's name. Upon your death, your spouse must certify that he or she was married to you at the time of your death. By choosing this option, you do not need to update the name of your spouse if your marital status changes.

Note: Community property. If you have ever lived in a community property state while you were married, your spouse at that time may have certain rights to your retirement account. You may want to consult with your estate attorney for guidance on community property rights. Vanguard will not assume responsibility for determining whether your IRA is subject to community property. Until we receive a properly documented community property claim at the time of distribution, we will not be liable to anyone for acting in accordance with the designation we have on file.

403(b)(7) custodial accounts. If you are married and own a 403(b)(7) custodial account that is part of an employer-sponsored plan governed by the Employee Retirement Income Security Act of 1974 (ERISA), your spouse may have special rights as a beneficiary. For more information, check with your employer.

My descendants

If you select your descendants, you can choose to distribute your assets equally among your surviving descendants and/or equally among your surviving grandchildren. The two options eliminate the need to update the names of any children or grandchildren born or adopted after you make this designation.

"To my descendants who survive me, per stirpes." This option enables you to have your assets distributed equally among your lineal descendants who are blood relatives or legally adopted. The first to receive your assets are your children (this does not include your stepchildren).

If any of your children die before you, the entire portion of assets due to that child will be divided equally among his or her surviving children (your grandchildren), if any.
If your deceased child has no children, his or her portion of assets will be divided equally among your other surviving children.
If all of your children die before you, their surviving descendants (your grandchildren) will receive the assets in equal shares.

Do not select this option if you want to designate your children as beneficiaries in unequal amounts. Instead, list their names under "Individuals."

"Equally to my grandchildren who survive me." Your assets will be distributed equally among your grandchildren who are alive at the time of your death (this does not include stepgrandchildren) Neither the family nor the estate of a grandchild who dies before you will receive proceeds from your retirement account. Do not select this option if you want to designate your grandchildren as beneficiaries in unequal amounts. Instead, list their names under "Individuals."

Individuals

This option enables you to designate one or more individuals. If you choose to designate your children or grandchildren by name, any additional children or grandchildren born or legally adopted after this designation is made will not be entitled to assets unless you specifically add them. You also may use this option to designate relatives who are not your descendants, as well as individuals not related to you.

Trusts

This option enables you to designate one or more trusts. Your assets will be payable to the trustee of your trust, who will be responsible for distributing the assets in accordance with the trust's terms. You have two options:

"To the trustee of an existing trust created under an agreement." This option enables you to leave assets to a trust created during your lifetime, also known as a living trust or an inter vivos trust.

"To the trustee of a trust created under my last will." This is for a trust that will come into effect after your death. If you create more than one trust under your will, you must specify which one will receive your retirement assets.

Note: You do not need to provide a trustee's name at this time. We will rely on the instructions of the trustee at the time of your death.

Organizations/Charities

This option enables you to designate one or more organizations or charities. Vanguard will not be responsible for monitoring how the organization or charity uses the assets.