IRA Beneficiaries
My clients often list the spouse as primary beneficiary and ‘all my children in equal shares’ as the contingent beneficiary. They do this rather than listing the individual children to avoid the necessity of updating the list if the family grows.
What are the potential legal ramifications of listing the beneficiary in this non-specific way? How does one determine who all the children are? Does this wording open the account-holder’s heirs to the possibility of dealing with a stranger who shows up claiming to be a child of their parent?
Permalink Submitted by Jose Morales on Tue, 2014-02-25 18:06
I feel that the security that comes with naming beneficiaries very specifically far outweighs that inconvenience of updating your beneficiary information occassionally. We would highly encourage the client to name each specific individual that they wish to have a claim to the IRA funds upon the IRA owner’s passing.
Permalink Submitted by J Futch on Thu, 2014-02-27 15:33
I agree — the more clarity that the actual account holder can provide while he/she is alive, the better. And .. think about this… what exactly does “all my children in equal shares” mean? Does it include stepchildren? Adopted children? What about a child who shows up that you didn’t know you had? (It can happen!). Just sounds like potential to create a lot of delay and expense when the time comes to distribute the IRA. Further, I don’t understand the concept of “avoiding the necessity of updating the list if the family grows.” Everyone should look at their IRA beneficiary designations at least annually, but always when there is a major life event (birth, divorce, marriage). Trying to name a bene that will take care of all future scenarios is just lazy. (That’s not directed personally to you.)