Update Beneficiary Designations
If you have complex estate wishes or want to utilize the per stirpes or per capita beneficiary designations, we recommending using Schwab’s Update Beneficiary Designations form.
One form is necessary per retirement account.
Retirement accounts include all types of Individual Retirement Accounts (IRAs). Non-retirement accounts, such as taxable brokerage accounts, use a different methodology for beneficiary designations.
After filling out your basic information in Part 1 and selecting whether you’d like to use per stirpes or per capita at the start of Part 4, most of the pages of this form are identifying your beneficiaries.
Primary beneficiaries are the main individuals who will inherit the assets. If all primary beneficiaries (and their descendants if per stirpes or per capita is selected) have predeceased you, then whoever you list as contingent beneficiaries will inherit the assets.
For each beneficiary designation, you must fill out either Name (First, Middle, Last) or Trust/Estate/Organization. If you want to designate a donor advised fund or trust as a beneficiary designation, you may benefit from reading “How to Designate Your Donor Advised Fund as a Beneficiary of Your IRA.”
Ideally, you should also fill out the portion you’d like the beneficiary to inherit and your relationship with the beneficiary. For portion, you can express your wishes as a percentage such as 50% or as a fraction such as 1/3. For relationship, you can bubble one of the available options or write-in the relationship. If all you have is name and portion, relationship will help Schwab identify which John Doe is your heir and which is just someone with the same name. In this way, even writing something as simple as “my close friend from college” may be helpful.
All the other fields such as social security number, date of birth, phone number, mailing address, and citizenship are to help Schwab either get into contact with or verify the identity of your heirs. They are optional, but it is best practice to fill out all the information that you have.
If your estate wishes do not fit in the format of this form, you are permitted to write “See attached” in Section 4 and then attach a signed letter describing your beneficiary designations. Examples of this strategy are described in “Six Creative Beneficiary Designation Ideas” and “Q&A: What Happens if an Inherited IRA Fails to Get Inherited?”
If you decide to use per stirpes or per capita, it is best practice to also designate an Authorized Party in Section 5. After your death and if one of your named per stirpes or per capita beneficiaries has predeceased you, then Schwab will use your authorized person to verify both the existence and identities of that beneficiary’s surviving issue (children or grandchildren).
This means you will want to pick both someone who is familiar with the current or future children of your named heirs and someone who is likely to outlive you and your heirs.
Identifying an authorized party could expedite the inheritance process. Schwab states in the fine print:
If, however, despite these reasonable efforts we are unable to locate the person you have designated as your Authorized Party, or that person is unable or unwilling to serve, then you, your estate, and your successors in interest understand and agree that Schwab will instead be entitled to rely on the verification of beneficiaries provided by the personal representative, executor, or administrator of your estate as identified in letters testamentary or letters of administration issued by a court of appropriate jurisdiction.
This means that if Schwab needs someone to verify the heirs’ identity but Authorized Party is left blank, Schwab will default to taking the instruction of your executor regarding verification of your beneficiaries. This could slow down the processing of your assets to the speed of probate.