Joint non-spousal beneficiaries for Roth IRA?
Is it possible to have joint non-spousal beneficiaries for a Roth IRA and use the joint life expectancy table for distributions to get more stretch?
My case – Two daughters two years apart in age.
Option 1 – One Roth IRA with my daughters as 50/50 joint beneficiaries with one inheriting when the other dies.
Option 2 – Two half-size Roth IRAs with one daughter as the beneficiary of each Roth IRA.
I estimate at the time of my death one will be 53 and the other will be 55.
Is Option 1 possible and if so is it desirable and would it yield a longer stretch for the lifetime distributions?
Permalink Submitted by Alan Spross on Fri, 2007-11-23 21:50
Option 1 must leave a 50% interest in the account to each primary beneficiary, it cannot provide for a single joint tenancy type of beneficiary. If you wanted to restrict the ability of each to name their own successor beneficiary, you would need a trust beneficiary containing the required provisions. The RMD would be based on the oldest beneficiary if the trust was qualified for look through treatment.
If you provided that each of the primary beneficiaries had a 50% interest, then separate accounts could be created after your death and each daughter could use their own life expectancy to determine their RMD and name their own successor beneficiary. The deadline for separate account creation is 12/31 of the year following the year of your death.
Option 2 also provides for the same result, except that you have separated the accounts while alive so that they do not have to meet the separate account deadline after your death. The only drawback to option 2 is that you would need identical investments in the accounts to prevent them from generating different values at your death. Option 2 may also result in higher fees if the custodian uses small account fees for the respective amounts.
Most typical would be simply naming them on one IRA as 50% primary beneficiaries and expect that they would deal with the account in a timely manner to create separate accounts, and would name logical successor beneficiaries. That way, you do not have to worry about keeping separate accounts of equal value while you are living. Of course, unique family circumstances may make the added expense of a trust necessary to exert sufficient post death control of where or how the funds are directed.