It’s vitally important to make sure that the proper beneficiaries are designated for your IRAs and other retirement accounts, since the beneficiary designation controls what happens to the account, regardless of what your will, trust, divorce settlement, or any other agreement says.
The following is based on IRA expert Ed Slott’s “IRA New Year’s
Obtain a copy of the beneficiary form for each IRA you own.
Make sure you have named a primary beneficiary and a secondary (contingent) beneficiary for each IRA you own. Secondary beneficiaries are less important for IRAs payable to trusts. However, before you name your trust as a beneficiary you must consult your estate planning attorney.
If there are multiple beneficiaries on one IRA, make sure that each beneficiary’s share is clearly identified with a fraction, percentage or the word “equally,” if applicable.
Make sure that the financial institution holding the IRA has your beneficiary designations on file and that their records agree with yours.
Keep a copy of all your IRA beneficiary forms and give copies to your financial advisor, attorney, and CPA.
Let your beneficiaries know where to locate your IRA beneficiary forms.
Review your IRA beneficiary forms at least once a year to make sure they are correct and reflect any changes during the year due to new tax laws or major life events such as death, birth, adoption, marriage, divorce, etc.
Check the IRA custodial document for every financial institution that holds an IRA account for you. Make sure that the document allows the provisions that are important to you and your beneficiaries. All IRAs are not created equal!
Do not name your estate as beneficiary.
If your IRA is large enough consider a Standalone IRA Trust to obtain maximum stretch-out and protection of your IRAs for younger beneficiaries.
Source: Anonymous blog post.