Parent choices when selecting IRA beneficiary

Seems from reading items in the discussion forum, the most recommended handling of
an IRA to be inherited by a non-spouse such as children , from a parent, is to have the parent not make the IRA beneficiary a will or a trust. Seems this will give the chance to the children to stretch the IRA’s RMD over a long period of time since presumable the children might be many years younger than the parent and therefore the children could use their much longer life expectancy tables to stretch future IRA distributions after death of parent

Am I correct in this assumption? Does it matter if the IRA is a conventional IRA or a Roth IRA



RMD amounts for non spouse inherited IRAs or Roth IRAs are the same. However, a beneficiary of a qualified trust is allowed to use the age of the oldest trust beneficiary to determine RMDs. If a minor child inherits an IRA, it is usually through an UTMA account and the minor would get a full life expectancy stretch. By far, the worst situation is when the owner’s estate inherits an IRA since the beneficiary under the will is not allowed to use their life expectancy. Either the 5 year rule or the decedent’s remaining life expectancy would be used.

Thus, when a estate inherits an IRA from the person who died  and that person did not specify a beneficiary,before death for the IRA  in the IRA form , then the presumed beneficiary is determined otherwise and will have to use the 5 year rule or the decedent’s remaining life expectancy. Correct?

  • Our clients generally provide for their beneficiaries in trust rather than outright to keep their inheritances out of their estates for estate tax purposes, and to protect their inheritances against their creditors and spouses.  The same reasons for leaving other assets in trust apply to IRAs.
  • For more on trusts as beneficiaries of retirement benefits, see my article on this subject in the March 2004 issue of BNA Tax Management’s Estates, Gifts & Trusts Journal:  https://www.kkwc.com/wp-content/uploads/2015/04/AR20041209132954.pdf 

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