Let’s look at a situation where more than one beneficiary is selected for an IRA.
When do multiple beneficiaries exist?
Multiple beneficiaries exist when an individual names more than one beneficiary for their IRA.
When should you name more than one beneficiary?
When you want your IRA assets to go to more than one person or entity without having to incur additional fees or paperwork by maintaining separate accounts for each beneficiary.
Here are five things to consider:
Due date for designated beneficiaries. September 30 of the year following the year of the IRA owner’s death is the date designated beneficiaries are determined for purposes of postdeath stretch and/or 10-year payments.
Due date for non-designated beneficiaries. These beneficiaries should be cashed-out before the September 30 date mentioned above. These beneficiaries include charities, estates and non-qualifying trusts since they have no measurable life expectancies. If they are not cashed out in time, they could prevent eligible designated beneficiaries from being able to stretch out distributions.
Due date for separate inherited IRAs. These should be established and funded for each designated beneficiary by December 31 of the year following the year of the account owner’s death. These accounts must retain the decedent’s name as part of their title and include language identifying them as “inherited” or “beneficiary” accounts, but they must use the beneficiary’s Social Security Number for reporting purposes.
Maximize the stretch. Each eligible designated beneficiary identified by September 30 can utilize his or her own single life expectancy to maximize the stretch IRA if a separate account is established and funded by December 31. The single life expectancy factor is determined in the year following the year of the account owner’s death. Going forward, the factor is simply reduced by one each year (unless the sole beneficiary is the spouse, in which case he/she re-determines his/her life expectancy each year).
What if you don’t split the account in time? By not splitting the account in time, eligible designated beneficiaries could lose the ability to stretch payments and could be saddled with a 10-year payout requirement.
Have questions regarding multiple beneficiaries? Feel free to contact our office with questions or visit assuredgroup.com for more information.
Copyright © 2024 Ed Slott and Company, LLC Reprinted from The Slott Report with permission.
Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.
Assured Concepts Group Ltd. is neither a broker-dealer nor an investment adviser. Securities and Variable Insurance products are offered through Purshe Kaplan Sterling Investments www.pksinvest.com, member FINRA/SIPC, www.finra.org, www.sipc.com. Advisory services provided through Assured Advisory Group, LLC, a Registered Investment Advisory Firm. Purshe Kaplan Sterling Investments is a full-service brokerage firm, operated primarily through independent registered representatives.
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