Inherited IRA accounts with Minor Grandchildren as the non-spouse beneficiaries
Grandmother, current age 76, has an IRA account and is only withdrawing the RMD amount each year. She is in excellent health. She wants to change the primary beneficiary from her son to her son’s four minor children (her grandchildren) as non-spouse beneficiaries. The grandchildren are ages 4, 8, 11, and 13. Her son is “very wealthy and doesn’t need the money” and she loves her grandchildren. Grandma primarily wants to make sure her grandchildren retain the use of and power over these funds. Tax consequences are of secondary importance to her. What would be the best planning options for her grandchildren if she should die today?
Permalink Submitted by William Tuttle on Sun, 2024-02-18 20:56
Minors should NOT be named as direct beneficiaries. It will require property guardianship under direct court supervision.
Probably the best choice is one or four trusts. The trusts must be properly designed for IRS look-thru treatment of Inherited retirement accounts.
Another option is the use of UTMA IRA accounts.