It happens all the time. My assistant Cat receives this call: “I just have one simple question for Marvin. How should I fill out the beneficiary designation form for my retirement plan?” As explained below, that question is anything but simple. Moreover, it’s critically important. The beneficiary designation form (not your Will) is the document that dictates where your retirement account goes when you die. And very often, the retirement account is the biggest asset in the estate.
In my post dated July 30th, I told the horror story of a retirement account (which was almost the entire estate) passing to a long-lost girlfriend. The beneficiary designation form hadn’t been updated in nearly 40 years! When you update your Will, don’t forget to also update your beneficiary forms.
For those who are married with kids, the “knee jerk” is to just designate your spouse, then your kids. However, the estate plan often contains trusts to protect assets from divorce, creditors, and taxes. By designating individuals, the retirement assets pass outright, and you lose all the important trust protections over those assets.
The better plan is usually to designate a trust as the beneficiary—but not just any trust. To achieve optimal tax benefits, it has to be a trust with special provisions, such as an “Accumulation Trust.” Such a trust allows for the longest possible stretch out, and assets paid into it are protected until needed. Until spent, the assets are in a pocket free from reach by creditors or divorcing spouses.
Roth IRAs can accumulate free of income tax. The decision to convert a traditional IRA to a Roth IRA (and pay the income tax hit early) involves a complicated mathematical analysis. With income tax rates rising in 2026, many plan to convert to a Roth in 2025 and pay the tax at today’s lower rates. But for those not converting to Roth, be aware that traditional IRAs are hit with income tax as the assets are distributed. There is a complex maze of tax rules to navigate in order to achieve optimal income tax deferral.
One more thing—if your estate makes a charitable gift, the most tax-efficient way to do it is to designate the charity as the beneficiary of retirement assets. Designating a charity avoids paying income tax and estate tax on the retirement assets. I’ll explain in more detail in next week’s post.
Suffice to say, how to fill out your retirement beneficiary form is no simple question!
Marvin Blum’s assistant, Cat Bardin, receives a call asking “just one simple question” on how to fill out a retirement plan beneficiary form—not a simple question!