A beneficiary is the person or entity you designate to inherit your retirement account when you die. You can name virtually anyone or any entity for that role. There are no IRS restrictions on who you choose.
Individuals you can name include a spouse, children, parents, siblings, or friends. Entities you can name include a trust, a charitable organization, or an educational institution. These categories can be mixed freely across primary and contingent designations.
A spouse has the most flexibility of any beneficiary type. When a surviving spouse inherits a retirement account, they can roll the funds into their own IRA and treat the assets as if the account were always in their name. Alternatively, a surviving spouse can elect to be treated as a beneficiary, which allows distributions without the early withdrawal penalty if they are under age 59½.
Naming a trust as beneficiary can be useful when your heirs include minors, individuals with disabilities, or family members who need managed distributions. A trust also gives you more control over who ultimately receives the funds after the first beneficiary. Because trust taxation can be complex, consult an estate planning attorney before choosing this option.
If you are married and live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, your spouse must provide written consent before you can name anyone other than your spouse to receive any portion of the primary beneficial interest.
Your beneficiary designation form controls who inherits your plan, not your will. A will has no legal authority over retirement account assets. Keep your designation form current and make sure your estate planning documents are aligned.
This information is provided for educational purposes only and should not be interpreted as tax, legal, or investment advice. Readers are encouraged to consult a qualified professional who can offer guidance based on their personal situation.