Business Builders

Beneficiary tune-up

Clients rely on you to help ensure their assets will pass according to their plan. You should periodically sit down with clients to review their beneficiaries and how they are designated.


Advisor Tip: Beneficiary meetings can be an opportunity to gain referrals. Ask clients and their beneficiaries if friends and family can use your retirement and legacy planning expertise.

Custom or default designations?

In cases of multiple generations within a family, you may need to customize beneficiary designations so that assets are passed according to your client’s wishes.

Advisor Tip: When setting up or reviewing an account, discuss with clients their legacy plans so that proper beneficiary designations can be put in place. This will save both you and your clients the worry in the future.

In a traditional default designation (Per Capita), if a primary beneficiary predeceases an owner, the assets would be split among the remaining primary beneficiaries—potentially disinheriting an entire "branch" of the family tree (see example below).

Traditional Default Designation (Per Capita)

Barbara listed John as a beneficiary, but likely did not intend to disinherit John's children in a case where John happened to predecease her.

An alternative designation, Per Stirpes, would allow the assets from John’s branch to flow down to the grandchildren even if John passes before Barbara.

Alternative Designation (Per Stirpes)

Using a "Stretch IRA" strategy

A "Stretch IRA" is a wealth-transfer strategy that can be used with traditional, Roth, SEP or Simple IRAs. Rather than the typical distribution of IRA assets, which need to occur within five years of the account owner’s passing, this strategy allows IRA beneficiaries to “stretch” the distributions from their inherited IRA over the beneficiary’s own lifetime, allowing for longer periods of tax-deferred growth.

If it is your client’s intent to provide his or her beneficiaries the option to "stretch," he or she must directly name the beneficiary (or beneficiaries) on the account, rather than passing the assets through trusts. Upon the owner’s death, each beneficiary has until December 31 of the year following the owner’s death to elect whether or not to stretch their portion of the IRA.