The importance of naming beneficiaries

By Elliot Raphaelson
Posted on June 23, 2025

Unfortunately, when a retirement plan owner or beneficiary makes an error regarding naming beneficiaries or managing his account assets, the result can be a loss of hundreds of thousands of dollars that don’t go to the beneficiary of their choice.

If you are the owner of a retirement plan with significant assets, it is crucial that you make your decisions regarding naming beneficiaries and managing these assets with the advice of a well-trained financial planner. It is too easy to make a costly mistake. In this column, I will address many of the ways in which costly mistakes can be avoided.

IRA beneficiary forms are important

Many IRA account owners do not understand the importance of the IRA beneficiary form. This is the document that controls whether your chosen beneficiary will receive the assets you want them to receive.

Many retirement account owners believe that they can name the beneficiary of their IRA in their will. That is wrong! Even if you name beneficiaries in your will, it has no relevance. Only the beneficiaries named on the IRA beneficiary form will be the recipients of your IRA assets.

If you don’t specify your beneficiaries on the IRA beneficiary form, then the result will be the same as not naming a beneficiary at all. In that case, your IRA assets will be part of your estate and become probate assets, which will be distributed according to state law.

When you specify your beneficiaries on the beneficiary form, make sure that the total amount of your assets you specify adds up to 100%.

For example, if you have more than one beneficiary, you should specify the percentage each should receive. If the total does not add up to 100%, then the beneficiaries will not receive what you intended.

Contingent beneficiaries

It is also important to specify “contingent” beneficiaries. So, for example, if you name your surviving spouse as the beneficiary of 50% of your IRA, specify who would receive the assets if your spouse predeceases you.

You should specify the percentage that the contingent beneficiary would receive. For example, you would specify that 50% of your wife’s inheritance would go to a named son and 50% to a named daughter.

Naturally, if one of your named beneficiaries predeceases you, immediately revise the beneficiary form and specify the new beneficiary, as well as the new contingent beneficiaries.

When your situation changes, such as a remarriage, immediately update the beneficiary form, not the will. Changing the terms of the will is not relevant. If you remarry and fail to revise the beneficiary form, after your death, the assets will go to whoever you specified on the form.

Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.