Filling Out the Form
do I need both primary and secondary beneficiaries?
should designate a secondary beneficiary in case your primary
beneficiary dies before you. If you haven't designated a secondary
beneficiary, the current terms of Vanguard's 403(b)(7) Custodial
Account Agreement provide that your assets will pass to your
surviving spouse, if you have one. If you do not have a surviving
spouse, your assets will pass to your estate. In the event the
assets pass to your estate, the Internal Revenue Service may require
your estate's beneficiaries to accelerate the distribution of the
assets—forcing them to pay higher income taxes than they might
Why do I have to complete the entire form if I only want to update
my secondary beneficiary?
You need to complete the entire
form because the beneficiaries you designate on the form will
supersede any previous instructions you provided regarding both your
primary and secondary beneficiaries.
Q. What if there isn't
enough space on the form for all of my beneficiaries?
you need more space to list additional beneficiaries, either
photocopy pages 2 or 3 of the form, or provide all of the
information requested in the same format on a separate sheet
attached to the form and submit it to Vanguard in the same
What happens if my beneficiary dies before me?
on which option you choose on the Vanguard 403(b)(7) Beneficiary
Designation form. Generally, if one of your primary beneficiaries
dies before you, your assets will be divided proportionately among
your surviving primary beneficiaries. If none of your primary
beneficiaries are alive at the time of your death, the assets will
pass to your secondary beneficiaries.
Note: This may differ
if you have chosen option 2 and designated your descendants per
Q. Why doesn't Vanguard need specific names for
some of these designations?
For the designations that are
based on the relationship of specific individuals to you at the time
of your death (options 1, 2, and 3), you do not need to include
information about them now because the personal representative of
your estate (or the trustee if you designate a trust as a
beneficiary) is responsible for providing Vanguard with the names of
your beneficiaries after your death.
It's a good idea to
discuss your beneficiary designation with your personal
representative to ensure that there's no misunderstanding about what
he or she will have to do and what information will need to be
provided after your death.
Q. How often should I review my beneficiary
You should review your beneficiary
designations whenever a major life event, such as marriage, divorce,
or birth of a child, occurs. Also, be sure your designations meet
your needs in light of any changes in the law such as estate or tax
law changes. Your beneficiary designations are an important part of
your estate plan, so make certain that they always complement other
documents such as your will or any trust agreements. You may want to
consult an estate attorney before making any beneficiary changes.
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Naming Your Spouse as
should I designate my spouse by relationship instead of by
By designating your spouse by relationship (option
1) rather than by name (option 6), your family may avoid potential
problems after your death because this option ensures that an
ex-spouse or the estate of a spouse who died before you will not
receive your account assets.
If you designate your spouse by
name, that person (or his or her estate if your spouse dies before
you) will inherit your retirement assets, regardless of any future
change in your marital status. So if you divorce and don't change
your beneficiary designation, your ex-spouse will inherit the
By choosing option 1 (to my spouse who survives me),
Vanguard will pay the proceeds of your retirement account to the
person to whom you are married at the time of your death. (You don't
need to provide Vanguard with any information about your spouse now;
we will obtain it when we receive a request
to distribute your retirement assets after your
Does Vanguard recognize community property laws?
states and Puerto Rico have laws that treat most property acquired
during a marriage as "community property" owned equally by both
spouses. If you once were a resident of those states or Puerto Rico,
any assets acquired during your marriage while living there may be
considered community property—even if the state where you currently
reside does not have community property laws.
beneficiary designation you file with Vanguard will not override any
community property rights that your spouse may have in your
retirement accounts. Until Vanguard receives a properly documented
community property claim at the time of distribution, we will not be
liable to anyone for acting in accordance with the designation we
have on file.
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Naming Your Children,
Grandchildren, or Others as Beneficiaries
Q. How can I name
all of my children as beneficiaries?
you want to designate all of your children as beneficiaries, you
should consider using option 2 (to my descendants who survive me,
per stirpes). This designation would first be payable to all
of your children who survive you (including those born after you
complete the designation form). If any of your children die before
you and leave surviving children (your grandchildren), those
children would equally share their deceased parent's share of your
account. If any of your children die before you but do not have
their own children, that child's share would be divided among your
Alternatively, you may designate your
children by name under option 6. If you choose this option, be sure
to update your designation if you have any more children after you
complete the form, or if any of your named beneficiaries dies before
Q. What if I designate my children or
grandchildren by name instead of by relationship?
If you designate your children or grandchildren by
name (option 6) rather than by relationship (option 2 or 3), be sure
to update your designation to add any later born children or
grandchildren because only the living descendants whom you name will
inherit your assets.
If you choose option 2 (to my
descendants who survive me, per stirpes), your assets will be
divided among all of your children. If a child dies before you, that
child's share will be divided among that child's offspring, if any,
or if that child did not have any offspring, among your surviving
children. You won't have to update your designation to add any later
born children or grandchildren.
Q. Who is
considered a descendant?
For the purposes
of distributing your retirement assets, Vanguard uses the term
descendant in option 2 (to my descendants who survive me, per
stirpes) to refer to lineal descendants. That is, offspring who
are blood relatives such as your children, grandchildren, or
great-grandchildren, including any legally adopted children.
Stepchildren or stepgrandchildren whom you or your children have not
legally adopted are not considered lineal descendants and will not
inherit your assets using this option. If you want to include any of
your non-lineal descendants as beneficiaries, you need to name them
in option 6 (other).
Q. Why aren't my nieces and nephews considered
descendants under option 2?
uses the term descendant to refer to a lineal descendant. Any person
who is in direct line to an ancestor is a lineal descendant. For
example, a lineal descendant is a child, grandchild, or
great-grandchild. A lineal descendant is distinguished from a
collateral descendant, who is related to you through the line of a
brother, sister, aunt, or uncle.
Q. What happens if I
choose option 2 and none of my children survive me?
If you choose option 2 (to my descendants who survive
me, per stirpes) and none of your children survive you, your
assets will pass to your surviving grandchildren. If there are no
grandchildren, your assets would then pass to your secondary
beneficiaries. If there are no surviving secondary beneficiaries or
you haven't named any secondary beneficiaries, the assets may pass
to your estate in accordance with Vanguard's IRA Agreement and be
distributed under court supervision (known as the probate
Q. Why doesn't Vanguard offer the option of
designating equally to my children who survive me?
If you were sure that all of your children would
survive you, a designation of "to my children who survive me" would
probably meet your needs. However, if one of your children died
before you, but left surviving children (your grandchildren), those
surviving grandchildren would be cut out of any share of your
retirement account. Because most people who name their children as
beneficiaries want to be sure that their grandchildren in this
situation will not be inadvertently disinherited, we offer option 2
(to my descendants who survive me, per stirpes). This option
ensures that you don't unintentionally disinherit your grandchildren
from your retirement account.
Q. How can I designate
my stepchildren or stepgrandchildren?
should name your stepchildren or stepgrandchildren individually
under option 6 (other). Just remember to update the designation
should you have additional stepchildren or stepgrandchildren;
otherwise, they will not receive any of the assets.
Q. Can I designate my
nieces and nephews or siblings by relationship using option
No. You can use option 6 (other) to
designate individuals by name who have a relationship to you other
than spouse, child, or grandchild, such as nieces and nephews,
siblings, or friends. You can also use option 6 if you want to
designate your spouse, child, or grandchildren by name rather than
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whom will my assets go if I don't name a beneficiary?
terms of the Vanguard 403(b)(7) Custodial Account Agreement provide
that if you do not name a beneficiary, your assets will go to your
surviving spouse. If you have no surviving spouse, your assets will
go to your estate. Your Vanguard 403(b)(7) Custodial Account will be
paid out in accordance with this default provision if you have not
named a beneficiary, all of your beneficiaries have died before you,
or the beneficiary does not come into existence, as the case may be
with a trust that was never created.
Q. Can I create a trust by
designating a trust as one of my beneficiaries?
trust is a legal arrangement under which a fiduciary, or trustee,
holds title to certain assets for the benefit of another. Trusts can
be created either during your lifetime or after your death through
your will. To create a trust, you should have an estate planning
attorney draft the appropriate trust documents. You cannot create a
trust merely by checking the box on the Vanguard 403(b)(7)
Beneficiary Designation form.
Q. What happens if I name a trust as
If a trust is your primary beneficiary, your
assets will be payable to the trustee of your trust. The trustee
will be responsible for distributing the assets in accordance with
the trust's terms.
If your trust is never established or
ends before you die (the trust is no longer needed), your assets
will be payable to the surviving primary beneficiaries, if any, or
to your secondary beneficiaries.
Q. How will Vanguard know when it
is time to distribute my assets to my beneficiaries after I
After you pass away, a beneficiary or your personal
representative is responsible for notifying Vanguard of your death.
Once we receive the request to distribute your retirement assets and
any required paperwork, we will begin distributing the assets to the
Q. Who will direct Vanguard on how to
distribute my assets?
After we receive notice of your
death, Vanguard will accept direction from someone authorized to act
on your 403(b)(7) Custodial Account. That party may include:
- The executor, administrator, or personal
representative of your estate.
- The trustee of the trust(s) named as beneficiaries
on the Vanguard 403(b)(7) Beneficiary Designation form.
- Other authorized persons.
Q. What is the
role of the executor? And, who is the executor?
The executor is the person or institution you name in
your will to administer and distribute the assets in your estate
during the legal process of settling your estate, called probate.
The executor manages your assets and makes sure any necessary tax
returns are filed. If you die without a will, an administrator may
perform these functions. An executor or administrator may also be
known as a personal representative.
Q. What if I don't have a
If you don't
have a personal representative, the court will appoint one during
the probate process.
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