Retirement Plan Beneficiary Designations

I recently had a very interesting conversation with a client regarding the beneficiary designation for an IRA of a deceased parent. The IRA assets are custodied at a very well known and large institution. The beneficiary designation for the IRA was designed to limit the amount of estate taxes, and the designation should achieve that result.

Sounds great, right?

The only problem is that the custodian is refusing to honor the beneficiary designation. Why you might ask? No one really knows, other than the designation is relatively complex. At this organization (which unfortunately is not that atypical), it is impossible to speak with someone in the legal department. Accordingly, the only option is to move the IRA to another custodian who will honor the designation. But, this can be much harder to do than you might think for various reasons.

Accordingly, be very careful when drafting beneficiary designations to insure that the IRA custodian will accept them. Even the best drafted designation in the world will be of no use if the custodian refuses to carry it out.