The beneficiary of an IRA is the person who inherits the IRA if the account holder passes away. They’re the person who “benefits” from the assets in the IRA. If you have an IRA, it’s important to tell your financial planning advisor who you’d like your account’s beneficiary to be.

Have You Listed the Beneficiary of your IRA with Your Financial Planning Advisor?

You Need a Beneficiary for Your IRA

Everyone who has an IRA should have a named beneficiary for the account. Even if you’re young and in good health, you never know when something will happen to you. Should the unfathomable occur and not have a named beneficiary, your IRA’s assets might not go to the person you’d like them to.

First, without a named beneficiary your IRA might be directed to someone who isn’t your first choice of heir. For instance, you may want to direct the account to a specific friend, family member or charity, but Massachusetts laws may direct it to a different, closer family member. It won’t matter if you’ve discussed who you’d like to pass your IRA onto with family members, unless you’ve had your financial planning advisor list that person as a beneficiary.

Second, even if the state laws eventually award your IRA to the person of whom you’d choose, the process of passing on your IRA could be drawn-out. Without a named beneficiary, your IRA will likely go into probate, which is a legal process in which a deceased individual’s assets are distributed to their heirs. Without a beneficiary explicitly named, determining who is the appropriate heir can take a while. If there’s any contention about who should receive your IRA, probate could also potentially be an expensive legal undertaking.

If you name a beneficiary, the distribution of your IRA will likely still need to be approved by a court. The process should be straightforward and quick, though.

Your Desired Beneficiary Might Change

Furthermore, even if you named a beneficiary when you first opened your IRA, that person might no longer be the person whom you’d like to inherit the account. For example, if you have gotten married or had children since starting your IRA, your desired beneficiaries may have changed. You might want to name a completely new beneficiary, your you might want to keep your current beneficiary and add others, thus splitting the account among multiple heirs.

Since your IRA will be distributed upon your passing according to the heirs named in it, it’s important to make sure the named beneficiary is always accurate. If the person named isn’t the person you’d like to leave your account to, the beneficiary should be updated as soon as possible.

Review Your IRA’s Beneficiary with your Financial Planning Advisor

If you have an IRA, take a moment to review the account’s beneficiary with your financial planning advisor serving your area. Your advisor should be able to answer any questions you have about beneficiaries and explain how your IRA would currently be distributed if something happened to you. They’ll also be able to help you make any changes to the listed beneficiaries that are necessary.