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Investor Insights Blog|What’s Possible and Not Possible When Naming an IRA Beneficiary

Managing Your Account

What’s Possible and Not Possible When Naming an IRA Beneficiary

In addition to saving funds for retirement, providing for loved ones or charities is another benefit of an IRA. The IRS provides information regarding the rules related to an inherited IRA.

Who can be an IRA beneficiary?

The options can vary depending on a number of factors such as the type of retirement account, the date the account was established, and the relationship of the beneficiary to the account holder.

In addition to naming a person as beneficiary (often a spouse, children or other individual), non-individuals such as trusts and charities can be named as IRA beneficiaries.

The IRS description of a trust:

“In general, a trust is a relationship in which one person holds title to property, subject to an obligation to keep or use the property for the benefit of another. A trust is formed under state law. You may wish to consult the law of the state in which the organization is organized. Note that for a trust to qualify under section 501(c)(3) of the Code, its organizing document must contain certain language. Publication 557 contains suggested language.”

The IRS has numerous resources regarding charitable organizations and organizations using funds or assets for charitable purposes. For example, some organizations are considered public charities while others are private foundations.

Making sure your account’s beneficiary information is up to date and reflects your wishes is important because IRA beneficiary information can supersede the information on a person’s Last Will and Testament.

It’s a good idea to review your will every year or so to make sure it remains current with your wishes.

CNN Money

CNN Money also states, “Also check it after major life changes, including the death of one of your heirs; the birth of a potential new heir; a significant shift in your financial situation; major adjustments to your investment portfolio; real estate purchases and sales; and changes to the tax code.”

Can your pet be an IRA beneficiary?

It’s possible to name a trust or charity as a beneficiary, but what about something unusual such as a pet?

No, you can’t directly list a pet as a beneficiary for an IRA.

But if you are interested in making sure a pet is taken care of after the account owner passes away, it might be possible to have a trust that is set up to care for a pet.

A Forbes article, “5 Things You Need To Know About Protecting Your Pets After You Die,” introduces the idea of a pet trust. The American Society for the Prevention of Cruelty to Animals (ASPCA) offers a resource on the pet trust laws for each state, plus the District of Columbia.

As with all estate, tax, and financial matters, a trusted professional can help you navigate the rules and options available when selecting a designated beneficiary for your retirement account.

Equity Trust Company requests beneficiary information as part of the process of establishing a new account.

We also have a Change of Beneficiary form so our account holders can change or update existing beneficiary information.

You can view your beneficiary information through myEQUITY, our account management portal for clients, as well as on your quarterly statements.

If you decide to update your beneficiary information, our client service team can assist you in completing the Change of Beneficiary form to process your request.

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