Rollover IRA, Roth IRA’s, and Employer Retirement plans such as 401ks, SEP, and SIMPLE IRAs, it’s recommended to have at least one primary beneficiary designated on the account. 

There are different types of beneficiaries that you can designate on your retirement accounts.

In layman’s terms, a primary beneficiary is the first in line to receive assets from a decedent’s account. You can have multiple primary beneficiaries, and the account does not have to be distributed equally. For example, you can have three primary beneficiaries, with one individual receiving 50% of the account assets, and the remaining two beneficiaries receiving 25% each. 

It is generally recommend having Contingent Beneficiaries on your accounts.

Contingent beneficiaries are second in line to receive assets, in the case that your primary beneficiary either predeceases you, or disclaims their inheritance. 

If multiple primary beneficiaries are listed – we’ll use the original example of 3 primary beneficiaries split 50/25/25% – so let’s say 2 of the 3 primary beneficiaries are alive. In that case, assuming a per-capita distribution is on file, the remaining two primary beneficiaries would then receive equal share, or 25% each of the deceased 50% primary beneficiary’s inheritance. If per-stirpes was selected, then the deceased beneficiary’s surviving children would receive their portion, in this case, 50% of the inheritance. We’ll get into the per-stirpes in a minute. 

If the primary beneficiary (or beneficiaries) predeceases the account holder, then the distribution would then automatically default to the contingent beneficiary instructions. 

To note, unless you are a spousal beneficiary, inherited retirement assets must go into an Inherited IRA registered account.

They cannot go into a traditional IRA (or Roth IRA). 

If you are a spousal beneficiary of a retirement account, you can receive your spouse’s retirement assets into a traditional IRA. 

Depending on when retirement assets were inherited, there are distribution rules that you should also be mindful of. 

If the original IRA owner passed away after December 31st, 2019, you are required to distribute the entire account within 10 years of the original owner’s death, unless you are an eligible designated beneficiary, or EDB. An EDB is either a surviving spouse, a disabled or chronically ill individual, a minor child of the IRA owner, or an individual who is not more than 10 years younger than the original IRA owner. 

Individual Brokerage accounts function almost exactly the same regarding individual primary and contingent beneficiary designations. When an Individually owned Brokerage account has at least one designated beneficiary on file, it is referred to as a TOD account – which stands for Transfer on Death. These accounts follow the same distribution guidelines as retirement accounts. 

For Joint Accounts – industry standards suggest registering them as Joint Ownership with Rights of Survivorship – meaning if one of the two account holders were to pass away, the account would automatically transfer to the surviving account holder. 

In most traditional cases – let’s say we’re talking about a husband and wife that have two children – spouses typically nominate each other as 100% primary beneficiaries and their children as equal contingent beneficiaries. In the case of Joint accounts owned by spouses, instead of nominating their children as contingents, since the husband and wife would default as sole account owner upon a spouse’s passing, the children would then be nominated as equal primary beneficiaries on a joint account with rights of survivorship. 

As of 2025, there are currently no government-sanctioned distribution rules or regulations for assets inherited from Individual or Joint accounts. 

Now, let’s get into the difference between per-stirpes and per-capita. 

For all individual beneficiaries, regardless of account registration, you can select per-stirpes or per-capita distribution. 

Whether per-stirpes or per-capita is selected and there is at least one surviving primary beneficiary, then assets will go to the surviving primary beneficiary as designated, and the other deceased primary beneficiary’s children, in equal shares. 

In the case that there are no surviving primary beneficiaries… 

If per-stirpes is selected, children of the deceased beneficiaries will split their parent’s share equally. For example, let’s say there were two primary beneficiaries, both deceased, and both designated for 50% each. If beneficiary A has two surviving children, each child 

would receive 25%. Beneficiary B had 3 children, so they would each receive an equal share of the 50%, or 16.67% each. 

If per-capita is selected and both primary beneficiaries are deceased, then all surviving children amongst both primary beneficiaries would split the account equally. Using the previous scenario, beneficiary A’s 2 children and beneficiary B’s 3 children – 5 children total – would receive 20% each. 

If neither per-stirpes nor per-capita is selected and all primary beneficiaries are deceased, then that is when the account will move on to the contingent beneficiaries. 

Outside of individual beneficiary designations, you can also designate an organization such as a Charitable Organization or Church, a trust, or in some cases, an estate. 

Without getting too in the weeds – there are usually specific reasons why it makes sense to nominate a trust or your estate as a beneficiary. Some of these might include a child or sibling with special needs that you’d like to leave an inheritance for. If there are complex or specific distributions outlined in a trust document that you’ve nominated a successor trustee to execute, or, if there are tax repercussions that you are trying to avoid. 

If your beneficiary wishes require a little more color than just a primary and contingent beneficiary, but you do not want to designate a trust or your estate, you can also provide a Complex Letter of Instruction, or LOI. This is basically just a letter, signed and dated by the account holder and accompanied by the custodian’s beneficiary designation form, that outlines your complex designation instructions. You can leave fixed dollar amounts to beneficiaries – so for instance you could leave a fixed $10,000 to beneficiary A, and the remaining two beneficiaries B&C would split the remainder of the account 50/50. 

In an LOI, you can also instruct for the account to be liquidated before distribution, so all beneficiaries would receive their inheritance in cash. Keep in mind that in most cases, we cannot liquidate an account for distribution after the account holder has passed away, unless there are specific instructions on file. Most accounts must be distributed “in-kind” – which means beneficiaries will receive their portion in invested positions. 

If you have a lot of beneficiaries or specific instructions, this is a straightforward way to designate your account without requiring a trust document. 

Lastly, if there are no designated beneficiaries on an account, your account will default to your estate, which will likely be subject to probate, and can be an extremely time-consuming and challenging process. 

Unfortunately, we’ve seen instances where clients have failed to designate a beneficiary on their account, and have to jump through a number of hoops just to get funds out of the decedent’s account, and eventually, distributed. 

At Howe & Rusling, we have seen first hand how important it is to have beneficiaries on all accounts, and highly recommend you evaluate periodically to make sure everything is up to date and in good order. 

Please reach out to your Wealth Manager or Client Service Manager if you have any questions, or want to make any changes to your account! 

Disclosures: The information provided herein is for educational and informational purposes only and should not be construed as personalized investment or legal advice. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or to adopt any investment strategy. You should consult your financial, tax, and legal advisors before making any decisions regarding beneficiary designations or estate planning strategies. Beneficiary designations can have significant legal and tax implications. The rules regarding retirement and non-retirement account inheritance are complex and may vary based on individual circumstances, applicable laws, and changes in tax legislation. The examples provided are hypothetical and for illustrative purposes only. They are not intended to reflect any actual client situation or to predict future outcomes. Actual outcomes may vary based on individual circumstances. Naming a beneficiary does not avoid all aspects of the probate process in all situations. Additional legal documents may be necessary to ensure the desired outcome. Use of per-stirpes or per-capita designations may be subject to state-specific interpretations and rules. Howe & Rusling is registered with the SEC, registration with the SEC does not imply a certain skill or training.