How to designate beneficiaries so they use their ages for RMD’s

Submitted by R K Brunson on Wed, 2016-01-20 22:18

My wife is the beneficiary of both my traditional and ROTH Ira’s. Our adult children ( 2) are contingent beneficiaries on both Ira’s. Assuming my wife inherits my Ira’s, I want to leave her instructions how to designate our children as beneficiaries so they can use their individual ages for any RMD’s. Am I correct in saying that splitting each Ira into two separate accounts with each child as 50% beneficiary will allow them to use their ages for any RMD’s?

Second question, will our children be required to make RMD’s from either the traditional or ROTH Ira’s?

Last question, what is the correct (or current) way to title an inherited Ira for my wife and/or children?



Submitted by Alan - IRA critic on Wed, 2016-01-20 22:43

  • Custodians have their own preferences on how to title an inherited IRA. The only two things that are required by the IRS are the name of the decedent and the name of the beneficiary, eg “robert smith as beneficiary of mary smith”.
  • The children need to create separate inherited IRA accounts no later than the end of the year following the owner’s death. Otherwise, both must use the age of the oldest child to calculate beneficiary RMDs.
  • The children will have the same RMD % for both inherited TIRA and inherited Roth IRA accounts, but the inherited Roth distributions should be non taxable.
  • Note that the last surviving parent will have the option to disclaim all or part of the IRA they inherit. In that case, the children would be treated as the designated beneficiaries. If the surviving parent does not disclaim they need to re establish the beneficiary they wish to inherit their own or inherited IRAs.
  • Surviving spouses have the option to roll over the inherited IRA or to leave it as inherited. They might leave it as inherited if they happen to inherit while still under 59.5. However, they must not forget and leave an inherited IRA in place too long since there will eventually be larger RMDs required and the children would lose their own stretch if they inherit a parent’s inherited IRA after that parent is required to take RMDs as a beneficiary.
  • Beneficiaries must complete the year of death RMD if the IRA owner failed to do so before passing. That RMD is taxable to the recipient.

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