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Useful tips for adding beneficiaries to your investment accounts

Ryan Guth

Ryan Guth
Founder & CEO

Helpful Tips

There are some general principles I’d like you to keep in mind when adding beneficiaries. These are best practices – not necessarily hard and fast rules.

Remember, beneficiaries and TOD (Transfer on Death) beneficiaries supersede or supplant your Last Will and Testament – as in, it doesn’t matter what your will says. Whoever you name as beneficiary will get your money. So, if you were divorced 25 years ago and you have that old 401(k) from back then, you better check on who that beneficiary is.

PRIMARY beneficiary – The first person/people to inherit the account (you must split by percentage and it MUST equal 100%)
CONTINGENT beneficiary – The person/people who collect if the PRIMARY isn’t able (in most cases, a CONTINGENT replaces a specific PRIMARY)

Traditional IRAs/SEPs/SIMPLEs (taxed when cash is distributed)

  • Real people make great IRA beneficiaries (less so trusts or for-profit entities): Spouses, domestic partners, siblings, and adult children (excluding man-babies) are just some ideas of who to choose for PRIMARY beneficiaries. 
  • If you have a living trust that dictates your wishes from the pearly gates: This is a great idea for a CONTINGENT (or fallback beneficiary) if your primary predeceases you.
  • Other great IRA beneficiaries are non-profit organizations, because they don’t pay taxes and traditional IRAs are normally taxed when money is distributed. 
  • If you’re thinking about your children/relatives that may benefit from your assets and you have one who’s a high-earner, and another who makes less, you may want the IRA to go to the lower earner (since their lower tax bracket may amount to less money being sent to the IRS during tax season than your higher-earning beneficiary). Perhaps the single or joint account goes to the high earner and the IRA goes to the lower earner. Remember, IRA distributions under the SECURE act no longer allow you to stretch out withdrawals over a lifetime for many beneficiaries. Many times one will need to distribute the whole account after 10 years. This could cause tax pain for a high earner who’s already in a high tax bracket. 
  • The guardians of minor children are great CONTINGENT options. This can be updated when the grandkids or nieces/nephews are adults. 

Roth IRAs (normal distributions not taxed)

  • Real people for PRIMARY beneficiaries are best (see above). 
  • Trusts make good CONTINGENTS.
  • Consider leaving out non-profits on this one.
  • Let’s leave out non-profits on this one. It’s way more impactful for a real person to inherit a likely-not-taxable asset. Doesn’t matter if they’re a PRIMARY or CONTINGENT.  
  • This one should go to the higher-earner as PRIMARY or CONTINGENT if you wish to give the IRS one last poke in the eye. 
  • And again, guardians for minors make great CONTINGENTS. 

Joint (Joint Tenants with Rights of Survivorship or JTWROS) Accounts

  • Joint owners are each other’s fallback plan, and TOD (Transfer on Death) beneficiaries come into play when all joint owners become angels (are dead). 
  • Name a trust as PRIMARY, if applicable. No CONTINGENT is necessary. 
  • Otherwise, name people (not minor children) or entities as PRIMARY and/or CONTINGENT.
  • Tenants in Common (a different type of account) allow each owner to add a beneficiary to their own portion of the account. 
  • You got that covered with the trust. Wasn’t that money well-spent? The trust document dictates the rules and the named trustee/successor trustee will take it from there when you buy the proverbial farm in the sky. 

Trust accounts

  • You got that covered with the trust. Wasn’t that money well-spent? The trust document dictates the rules and the named trustee/successor trustee will take it from there when you buy the proverbial farm in the sky. 

Securities offered through SCF Securities, Inc. • Member FINRA/SIPC • Investment advisory services offered through SCF Investment Advisors Inc. • 155 E. Shaw Ave., Suite 102, Fresno, CA 93710 • 800.955.2517 • 559.456.6109 FAX. • Atria Wealth Solutions, Inc. (“Atria”) is not a registered broker-dealer or Registered Investment Advisor and does not provide investment advice. SCF and SCF Investment Advisors, Inc. are subsidiaries of Atria. SCF, Atria, Charles Schwab, and Guth Financial are independently owned and operated.


Required Disclosures. Note The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk including possible loss of principal. No strategy assures success or protects against loss. To determine what appropriate for you, consult your financial advisor prior to investing.

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