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Adding beneficiaries to your IRAs

IRAs offer a few options not available for other types of accounts.

Who can be an IRA beneficiary?

The short answer: Anyone can be a beneficiary on your IRA, including minor children. And your beneficiaries don't need to be family members.

It's important that the beneficiaries listed on your Vanguard accounts match your beneficiaries' legal names when they inherit the accounts, so don't use nicknames.

Your spouse

Your spouse can be your beneficiary on any type of account. If you have an IRA, you may designate the person you're married to as your beneficiary by name. But if you designate by relationship rather than by name, you'll need to remember to update the beneficiary if you divorce or your spouse dies.

Your children or grandchildren

Likewise, you can name each of your children or grandchildren individually as beneficiaries. If you have more than one child or grandchild, you could decide to divide the allocations unequally among them. If you have 3 children, for example, you could divide the money 50%-30%-20%.

Trusts

If you've already created a trust, you may name it as a beneficiary, which can also help to avoid probate. And if your children are young or have special needs, a trust can make sure they're properly cared for.

Trusts can help ensure that your estate is managed if you become incapacitated, but trusts can be expensive and usually require legal expertise to establish. Check with an estate-planning attorney for more information about how to create a trust.

Charities & other organizations

You may name charities or other organizations as beneficiaries and divide the allocations among them in whatever percentages you'd like. Contact the charity you wish to name and ask whether it has any instructions for naming it as a beneficiary.

If you name organizations as beneficiaries, arrange for someone to notify them of your death. We don't contact beneficiaries after the deaths of Vanguard account owners.

If you're interested in naming a charity as your beneficiary, consider Vanguard Charitable—a donor-advised fund that offers a tax-effective way to grant assets to charity. Vanguard Charitable offers the highest value donor-advised fund, a claim backed by a low all-in fee and alignment with Vanguard's time-tested investing principles.

Using relationships, not names

Your IRA beneficiaries' names may change over time. Some marriages end, and some spouses remarry after being divorced or widowed. If account owners forget to check the names of their beneficiaries, the names may no longer reflect their intentions.

For example, Ellen names her husband John as the primary beneficiary of her IRA. They divorce, and a few years later, Ellen marries Tom. To make Tom the beneficiary of her IRA, Ellen would have to remember that she'd originally named John as her beneficiary and make the change herself.

To avoid similar situations, consider designating your beneficiaries by their relationships to you. For example, you can leave your IRA "to the person I am married to at the time of my death."

Including all of your children automatically

To designate all of your children as beneficiaries, you can leave your IRA "to my descendants who survive me, per stirpes." Then you wouldn't need to check your children's names as they marry or divorce.

The "to my descendants who survive me, per stirpes" designation would divide your assets equally among all of your children who survive you. If any of your children die before you, that child's children—your grandchildren—would equally share their deceased parent's share of your assets.

If any of your children die before you without children of their own, their shares would be divided among your surviving children.

Stepchildren aren't included in the "to my descendants who survive me, per stirpes" designation. If you'd like to leave your IRA to your stepchildren, you should add them as named beneficiaries.

To my descendants who survive me, per stirpes

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REFERENCE CONTENT

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Beneficiary

A person or organization designated to receive the proceeds of an investment account (or an insurance policy, a pension, or an annuity contract) after the owner's death.

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IRA

A type of account created by the IRS that offers tax benefits when used to save for retirement.

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Trust

A legal arrangement through which a third party holds property, such as investments or real estate, on behalf of a beneficiary. Trusts are often used to reduce or eliminate estate taxes.

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Probate

A court procedure that validates a will and settles the decedent's estate. During probate, the estate's executor or administrator collects the estate's assets, pays liabilities and necessary taxes, and distributes property to heirs.

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Per stirpes

Rather than name beneficiaries, the account owner can use the "per stirpes" designation to divide assets equally among his or her children (but not stepchildren). All children who survive the account owner will share the assets equally.

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To my descendants who survive me, per stirpes

Rather than name beneficiaries, the account owner can use the "to my descendants who survive me, per stirpes" designation to divide assets equally among his or her children (but not stepchildren). All children who survive the account owner will share the assets equally. If any of the children die before the account owner, that child's children—the account owner's grandchildren—would equally share their deceased parent's share of the account.