Do you know who your IRA beneficiary is?

Deciding whom to designate as a beneficiary for your IRA might seem like a no-brainer - you probably want your money to go to someone near and dear to you. But is the person (or people) you're thinking of actually the one(s) you named on the IRA beneficiary form all those years ago when you opened the account?

To be certain, it's wise to review your beneficiary designation form at least every few years, or whenever you've had a change in circumstances, such as a divorce. Changing your beneficiary is easy - you simply complete a new beneficiary designation form. Keep in mind that a will or trust does not override this form unless you name your estate or trust as your beneficiary; however, spouses may have special rights under state law (community property statutes vary by state). Because beneficiary designations are important estate-planning documents, you may want to review them with your attorney before filing them with your IRA custodian.

Beneficiary designation forms offer the option of naming primary and contingent beneficiaries. The primary beneficiary is your first choice to receive your retirement benefits and can be more than one person or entity. If you choose more than one primary beneficiary, you may specify a percentage to be paid to each person and indicate whether a beneficiary's share will be void if he or she predeceases you or if that share will pass to his or her children. This situation typically comes into play when you designate equal shares to all your children. You also can name a minor as a direct beneficiary of an IRA, but your local probate court may require the appointment of a guardian for the minor.

A contingent beneficiary is someone you designate to receive your IRA only if all primary beneficiaries predecease you, die simultaneously with you or disclaim their rights to the IRA assets. These are the only circumstances under which a contingent beneficiary would be entitled to the assets in your IRA.

If you have special circumstances (for example, you would like to leave dollar amounts rather than percentages to your beneficiaries), it also is possible to customize a beneficiary designation - you will probably want to enlist professional help to guide you through this process.

Distributions from an IRA may have tax consequences for your beneficiaries. While taxes shouldn't be the primary determining factor in naming your beneficiaries, ignoring the impact of taxes could have significant consequences for your family. A tax advisor can help you weigh the pros and cons carefully in order to make sure your wishes are executed in a tax-efficient manner.

Selecting your IRA beneficiaries can be challenging, both emotionally and financially, given the potential tax implications. Remember to look at your IRA assets in context with the rest of your estate before making any decisions. To help ensure that your wishes can be executed as you intended, discuss your beneficiary designations, wills and other estate matters with your tax and legal advisors and other members of your advisory team.

• William Creekbaum, MBA, CFP, a Washoe Valley resident, is senior investment management consultant of Morgan Stanley Smith Barney LLC. He can be reached at william.a.creek

baum@smithbarney.com or 689-8704.

When naming a primary beneficiary, some designations to be familiar with are "all my children," per stirpes and per capita. Terminology and definitions may vary from state to state, however, so you should consult with an attorney before making a final decision.

All My Children: If you use this term or name each child specifically, your IRA assets will be divided among your surviving children only. If one of your children dies before you, the remaining children will share equally in the deceased child's portion.

Per Stirpes: Also known as "rights of representation" in some states, per stirpes means that the children of a beneficiary who predeceases you will share equally in the portion of your IRA originally left to the now-deceased child.

Per Capita: This method divides your IRA assets among your beneficiaries and the descendants of any beneficiary who dies before you. For example, if you name your three daughters as your primary beneficiaries and one of them dies before you, each of her own three children will receive a share equal to that of your other two daughters - splitting the IRA into five equal parts.