Minor as Beneficiary of IRA

Submitted by Kim Stark on Mon, 2016-10-31 18:51

I’ll try to keep it simple. I have a substantial IRA with my adult child as beneficiary, who is currently pregnant. I don’t know what to do about naming a contingent beneficiary on the IRA in case she predeceases me or whom she should name when she inherits.

1) If she put’s her children as beneficiaries, am I correct that they would be required to #1 – fall under UTMA rules and #2 – be required to take RMD’s based on my daughter’s life expectancy? If she predeceases me and I’ve named them as primary beneficiaries, it would be based on their life expectancy?

2) If we named a Trust as contingent beneficiary, what would the annual distribution requirement be? Same rules – except I get to determine when they get control and how much vs. falling under UTMA rules?

I’ll throw another one out there. I myself have an inherited IRA. I understand my beneficiary will have to continue to take RMD’s based on my life expectancy. What happens if she predeceases me and her children are beneficiaries.

I can’t think of any solutions. Any thoughts? Converting it to a Roth would be tax nightmare.

P.S. I’m thinking having a large IRA at death isn’t such a great plan.



Submitted by Alan - IRA critic on Mon, 2016-10-31 19:07

  1. Basically correct, but there might be some variations in UTMA rules from state to state.
  2. If the trust is qualified for look through, and she either pre deceased or disclaimed, RMDs would be based on the oldest trust beneficiary.
  3. If you have a non spouse inherited IRA, whoever inherits it upon your death must continue your RMD schedule, reducing the prior year divisor by 1.0 for each successive year. Therefore the stretch cannot be expanded after your death no matter who you name as successor beneficiary. You cannot convert a non spouse inherited IRA to an inherited Roth. Even if you owned your Roth, your non spouse beneficiary would have to take beneficiary RMDs.


Submitted by Kim Stark on Tue, 2016-11-01 13:19

What about naming my grandchild as primary beneficiary, daughter as contingent?  The child would have to take RMD based on their life expectancy.   It would be taxed at child’s tax rate.   Daughter as custodian would use it for their health, maintenance, support, education.   I could put it in Trust, giving my daughter control during her lifetime.    If the grandchild should predecease my daughter, she’d become beneficiary and need to take RMD based on child’s life expectancy?    The flaw I see to this is obviously that I’d be taking away my daughter being able to have these assets to support her retirement or other needs.  What am I missing here?



Submitted by Bruce Steiner on Tue, 2016-11-01 15:21

  • Your analysis is basically correct.  If you leave your IRA in trust for your grandchild, the trustees can stretch the distributions over the grandchild’s life expectancy (assuming the trust is properly drafted), and can make distributions to or for the benefit of the grandchild and the grandchild’s issue.
  • There’s no need to limit distributions to health, maintenance, support and education.
  • As you point out, if you leave your IRA to or in trust for your grandchild, it won’t be available for your daughter.  You would have to consider whether your other assets are sufficient to provide for your daughter.
  • Bruce Steiner


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