minor as beneficiary for IRA
What are the options for a minor if they are beneficiary of an IRA whose owner is now deceased? This is Florida and the minor is 14.
What are the options for a minor if they are beneficiary of an IRA whose owner is now deceased? This is Florida and the minor is 14.
Permalink Submitted by Alan Spross on Thu, 2010-09-23 22:00
IRA agreements typically carry provisions which default to state law in situations like this. Under state law a responsible party such as a guardian will be allowed to make decisions for the minor, such as investment changes, naming a successor beneficiary, and fulfilling RMD requirements. Major custodians are aware of the various state requirements and can provide information to the responsible party. The RMD requirements are not altered due to the minor status, although the RMDs obviously are only a small percentage of the account balance. For a 14 year old, it would only be 1.45%.
While very rare, a minor is not limited by the 9 month disclaimer deadline. They can wait until 9 months after they reach age 21 in the unlikely event this is desired.
Permalink Submitted by Bruce Steiner on Sun, 2010-09-26 02:26
Depending on state law, having a guardian appointed for a minor can be cumbersome. Since the required distributions are modest, and since the beneficiary is 14, it’s worth seeing if the custodian will allow the minor to deal with the IRA directly (despite being a minor), or if there is some way to get an inherited IRA payable to a parent as custodian under the Uniform Transfers to Minors Act.
This should serve as a reminder to name either a trustee (if the amount involved is sufficient to warrant administering a trust) or a custodian under the Uniform Transfers to Minors Act (if the amount involved is not sufficient to warrant administering a trust) as beneficiary, rather than a minor directly.