According to Forbes and Financial-Planning.com, in July 2007, Vanguard notified its customers in a form letter that it is requiring them to have the same beneficiaries designated on all IRA accounts of the same type. If a customer doesn’t contact Vanguard, then Vanguard will apply the newest beneficiary form to all IRAs. If two forms were submitted at the same time, Vanguard will treat the one it processed later as newer. Therefore, Vanguard’s policy, not a person’s will, determines who gets the money from an IRA account. The letter that was sent out was labeled "Change in beneficiary policy will help you simplify your planning."
Apparently, there is no way customers can get around the new rule. According to an article in Forbes, its reporters made two customer service calls to Vanguard. “There’s no way to override the computer,” declared one rep. He added that Vanguard is “a low-cost provider” and permitting different beneficiaries would increase its cost.
The other rep insisted that competitors wouldn’t allow different beneficiaries on IRAs, either. However, Fidelity and Charles Schwab said they allow clients to name different heirs on different IRA accounts. American Funds, Citibank, E-Trade, Janus Capital Group, Merrill Lynch, MFS, and Wachovia, do as well.
If a client wants to invest IRA funds for different beneficiaries differently based on their own assets or taste for risk, Vanguard will still not allow that, said Colin Kelton (the Vanguard representative that signed the July notice). That could drag Vanguard into family disputes, and curbing litigation is one reason for the policy change, he said.
This is another good reason to review your beneficiary designations and the policies of your IRA custodians.