Naming Contingent Beneficiaries of Your IRA is a Good Idea
By Joe Cicchinelli, IRA Technical Expert
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Almost all IRA owners will name a primary beneficiary of their IRA; usually some person who will receive your IRA assets after you die, such as your wife or husband or children. Virtually all IRA custodians will also allow you to name a contingent beneficiary.
A contingent (or secondary) beneficiary is entitled to your IRA funds only if the primary beneficiary dies before you or when a primary beneficiary disclaims the assets. You must name all beneficiaries, both primary and contingent, while you are still alive.
Always name a contingent beneficiary in case the primary beneficiary dies before you to take advantage of after-death estate planning and disclaimer opportunities available under the IRA rules.
Ask IRA financial institutions if they allow the use of disclaimers and to send you copies of the beneficiary forms to make sure all beneficiaries are named in writing. If the form has deceased beneficiaries (which is common when beneficiary forms have not been checked in a while), your estate may become the beneficiary. That would probably be the worst choice of all because the estate cannot extend the life of the IRA. Also, your heirs will have probate and other legal costs when your estate is the beneficiary.