It’s never too early to start estate planning. It may seem daunting, especially when considering who will receive your assets when you die. That’s why it’s important to understand the role of beneficiaries and how to designate them for all your pertinent assets and accounts.
Who gets my stuff when I die?
Your estate plan determines that! But first off, it’s important to know what exactly a beneficiary is.
A beneficiary is an individual or entity/organization that you designate to receive your belongings or assets in the event of your death. It’s important to have one as it ensures your assets are distributed according to your wishes when you pass away. (ref. 1)
A beneficiary can be designated on retirement, brokerage, bank and other financial accounts. If you designate beneficiaries, that designation is unique to the account, avoids probate (which we will discuss in a later post) and supersedes your Will.
It’s important to note that there are two types of beneficiaries when considering designations: primary and contingent.
What’s the difference between a primary and contingent beneficiary?
Generally speaking, a primary beneficiary is the first individual(s) to receive your account benefit upon your death. A contingent beneficiary is an individual or entity whom you choose to inherit your accounts/assets in the event the primary dies or elects not to inherit the assets (as shown below). (ref. 2)
What happens if I don’t choose a beneficiary?
If you die without having named a beneficiary on an IRA, your custodial agreement will determine who inherits the account. Typically, these agreements will designate your surviving spouse as your beneficiary if you are married at the time of death. If you are not married, your estate may automatically become a beneficiary of the IRA. For non-IRA accounts, whatever your Will says will determine how your assets are distributed. (ref. 3)
What about their children?
Generally, if you have multiple beneficiaries, Ann, Bob and Charles, and Charles dies before you, his share will pass to Ann and Bob (as illustrated in Fig. 1). Distribution options such as Per Stirpes and Per Capita will pass your accounts to your beneficiaries’ children (as in Fig. 2).
Per Stirpes or Per Capita can be defined in different ways depending on the custodial agreement or law, so take care to understand the implications of each designation. Discuss other arrangements with your custodian.
What about my IRAs?
IRAs and other tax qualified accounts are generally not subject to the terms of your Will. If you do not designate a beneficiary, the custodian, state or federal law may determine who inherits your account. It is important to designate beneficiaries to control who gets the account. Remember, inheriting an IRA may have significant tax consequences for your beneficiaries.
Designating beneficiaries has complex tax and estate consequences and requires careful coordination with your entire estate plan. This is a general overview of beneficiary designations on investment accounts and is not legal, tax or investment advice. Work with the custodian of your accounts to designate or review beneficiaries.
Trust issues?
Establishing a Trust is another way to ensure that your assets are distributed the way that you wish. It is generally possible to have much more detailed instructions and name a trustee to exercise control over your assets after your death. In particular, trusts are helpful for complicated assets (such as estate tax issues or property in multiple states) or complicated beneficiaries (such as minors, multiple families or beneficiaries who cannot handle their own finances).
In the case of an IRA or other tax qualified accounts, living individuals typically have the most flexible options. Trusts may be at a disadvantage when it comes to distribution options, taxes and general complexity. Take extra care when considering naming a Trust as beneficiary of your IRA.
Where can I read more?
https://www.schwab.com/resource/titling-beneficiary
[1] Julia Kagan, “What Is a Beneficiary? Role, Types, and Examples,” Investpedia, July 14, 2025, https://www.investopedia.com/terms/b/beneficiary.asp.
[2] “What is a contingent beneficiary? Making the right beneficiary choice matters,” Fidelity Investments, accessed December 1, 2025, https://www.fidelity.com/learning-center/smart-money/what-is-a-contingent-beneficiary.
[3] “Designating a Beneficiary for Your IRA,” Benjamin F. Edwards, Accessed November 17, 2025,https://www.benjaminfedwards.com/wp-content/uploads/2024/09/designating-a-beneficiary.pdf.
