The Art of Planning for Multiple IRA Beneficiaries
When you name more than one beneficiary on your IRA, then you need to know the rules for Multiple IRA beneficiaries.
It can be much easier to simply name multiple beneficiaries on your IRA instead of having a separate IRA for each named beneficiary, but there are rules that apply.
Remember there are three types of IRA beneficiaries:
1. Non-designated beneficiaries
2. Non-eligible designated beneficiaries
3. Eligible designated beneficiaries
The due date for a designated beneficiary is Sept. 30 of the year following the year of the IRA owner’s death. It is the date designated beneficiaries are determined for purposes of post-death stretch and/or 10-year payments.
For non-designated beneficiaries, these beneficiaries should be cashed out before the Sept. 30 date mentioned above. Non-designated beneficiaries include charities, estates, and non-qualifying trusts, since none of these have a measurable life expectancy. If they are not cashed out in time, they could prevent eligible beneficiaries from being able to stretch out their distributions.
Separate inherited IRAs should be established and funded for each designated beneficiary by Dec. 31 of the year following the year of the account owner’s death. These inherited IRAs must keep the name of the original IRA owner as a part of their title and include language identifying them as inherited or beneficiary accounts. Still, they must use their own social security number for reporting purposes.
Eligible designated beneficiaries identified by the Sept. 30 date can utilize their own single life expectancy to maximize the stretch IRA if a separate account is established and funded by Dec. 31.
If you don’t split the account in time, eligible designated beneficiaries could lose the ability to stretch payments and could be saddled with a 10-year payout.
Multiple Beneficiaries on IRAs can be confusing, but that is one reason RFG Wealth Advisory in Argyle, Texas, is here. Call us today with your beneficiary questions at 940-464-4104. We are happy to help you.
Investment advice is offered through RFG Wealth Advisory, a Registered Investment Advisor.