Yes, an IRA can be payable on death. Every IRA includes a built-in beneficiary designation feature that allows account assets to transfer directly to named individuals when the account holder dies. This transfer happens outside of probate court, which means your loved ones receive the funds faster and avoid costly legal fees.
The Employee Retirement Income Security Act (ERISA) and Internal Revenue Code Section 408 create the legal framework governing IRA transfers at death. Under these federal rules, the beneficiary designation on your IRA form takes legal precedence over anything written in your will. According to financial industry data, more than one-third of all IRA death claims are processed without a valid beneficiary being identified—a problem that forces assets through probate and delays access to funds for grieving families.
In this article, you will learn:
- 💰 How IRA beneficiary designations work and why they override your will
- ⚖️ The difference between spousal and non-spousal beneficiary rules under the SECURE Act
- 📋 Step-by-step guidance on completing IRA beneficiary designation forms correctly
- ⚠️ Common mistakes that derail your estate plan (and how to avoid them)
- 🏛️ State-specific rules that could affect your IRA transfer, including community property laws
How IRA Beneficiary Designations Actually Work
An IRA beneficiary designation is a legal document you complete through your IRA custodian (like a bank, brokerage, or mutual fund company). This form names the person or entity who will receive your IRA assets when you die. The designation creates a contract between you and the financial institution that operates independently from your estate plan.
When you open any IRA—whether Traditional, Roth, SEP, or SIMPLE—the financial institution provides a beneficiary designation form. You can name anyone you choose: a spouse, child, sibling, friend, charity, or even a trust. The custodian keeps this form on file and uses it to determine where to send the money after your death.
The IRS defines a beneficiary as “any person or entity the account owner chooses to receive the benefits of a retirement account or an IRA after they die.” This broad definition means you have significant flexibility. You can name multiple beneficiaries and assign each a specific percentage of your account.
Why IRA Beneficiaries Trump Your Last Will and Testament
Your will governs only assets that pass through your probate estate. An IRA with a named beneficiary bypasses probate entirely. The legal term for this is a “non-probate transfer.” Because the IRA has its own built-in transfer mechanism, it operates outside your will’s instructions.
Consider this real-world scenario. A father, upset with his son, visited an attorney to remove the son from his will. The attorney changed the will accordingly. The father died, and the family discovered he never updated the beneficiary designation on his $500,000 IRA. The son—whom the father explicitly wanted to exclude—inherited the entire IRA account because the beneficiary form controlled.
| Document | What It Controls |
|---|---|
| IRA Beneficiary Designation | IRA assets only; takes legal priority |
| Last Will and Testament | Assets without beneficiary designations; passes through probate |
This override rule applies even if your will contains explicit language about your IRA. The beneficiary form always wins. Financial institutions follow the form on file—not your will, not verbal promises, and not letters of intent.
Transfer on Death (TOD) vs. Payable on Death (POD): Critical Distinctions
Financial institutions use different terminology for death-transfer mechanisms. Understanding the difference between POD and TOD designations helps you navigate estate planning documents correctly.
POD (Payable on Death) applies to bank accounts like checking, savings, money market accounts, and certificates of deposit. When you add a POD designation, the assets in the account transfer to your named beneficiary upon death.
TOD (Transfer on Death) applies to investment accounts, including IRAs, 401(k)s, and brokerage accounts. With a TOD designation, ownership of the account transfers to your beneficiary.
Both POD and TOD bypass probate. Both can be changed or revoked at any time during your lifetime. The key difference is the type of asset involved. For IRA planning, you work with TOD-style beneficiary designations, though many people use “payable on death” as a general term for any death-transfer mechanism.
| Feature | POD (Payable on Death) | TOD (Transfer on Death) |
|---|---|---|
| Account Types | Bank accounts, CDs, savings bonds | IRAs, 401(k)s, brokerage accounts |
| What Transfers | Account assets | Account ownership |
| Probate | Bypassed | Bypassed |
| Revocable | Yes, anytime | Yes, anytime |
The SECURE Act Changed Everything for IRA Beneficiaries
The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in December 2019, dramatically altered how inherited IRAs work. Before this law, most beneficiaries could “stretch” IRA distributions over their entire life expectancy, taking small required minimum distributions (RMDs) each year. This allowed the account to continue growing tax-deferred for decades.
The SECURE Act eliminated the stretch IRA option for most non-spouse beneficiaries who inherit accounts from owners dying after December 31, 2019. Now, these beneficiaries must empty the inherited IRA within 10 years of the original owner’s death.
The SECURE 2.0 Act, passed in December 2022, made additional changes. Starting in 2025, the IRS confirmed that certain beneficiaries subject to the 10-year rule must also take annual RMDs during that period—they cannot simply wait until year 10 to take everything out.
Eligible Designated Beneficiaries: The Exceptions to the 10-Year Rule
The SECURE Act created a special category called eligible designated beneficiaries (EDBs). If you qualify as an EDB, you can still stretch distributions over your life expectancy instead of following the 10-year rule.
Five categories of people qualify as EDBs:
- Surviving spouses of the deceased account owner
- Minor children of the deceased (until they reach age 21)
- Disabled individuals meeting IRS criteria under Section 72(m)(7)
- Chronically ill individuals meeting IRS criteria under Section 7702B(c)(2)
- Beneficiaries not more than 10 years younger than the deceased owner
If you fall into one of these categories, you receive more favorable distribution options. Surviving spouses have the most flexibility of any beneficiary type.
| Beneficiary Type | Distribution Rule |
|---|---|
| Surviving Spouse | Life expectancy OR roll over to own IRA |
| Minor Child (of owner) | Life expectancy until age 21, then 10-year rule |
| Disabled Individual | Life expectancy |
| Chronically Ill Individual | Life expectancy |
| Person ≤10 Years Younger | Life expectancy |
| Other Individual (non-EDB) | 10-year rule |
| Non-Person (Estate, Non-See-Through Trust) | 5-year rule |
Spousal Beneficiaries: Maximum Flexibility and Control
Surviving spouses receive the most advantageous treatment under IRA beneficiary rules. A spouse who inherits an IRA has multiple options not available to other beneficiaries.
Option 1: Roll the IRA into Your Own IRA
A surviving spouse can transfer the inherited IRA assets into their own existing IRA or a new IRA in their own name. Once rolled over, the assets are treated as if the spouse always owned them. The spouse follows normal IRA rules, takes RMDs based on their own age, and names their own beneficiaries.
Option 2: Remain a Beneficiary of an Inherited IRA
The spouse can keep the account titled as an inherited IRA. This option makes sense if the surviving spouse is younger than 59½ and needs access to funds without paying the 10% early withdrawal penalty.
Option 3: Treat the IRA as Your Own
For Traditional IRAs, if the deceased spouse had not yet reached their required beginning date (RBD) for RMDs, the surviving spouse can delay distributions until the year the deceased would have turned 73.
Option 4: Leave in Decedent’s Name (SECURE 2.0 Addition)
The SECURE 2.0 Act created a new option allowing surviving spouses to leave the inherited IRA in the deceased spouse’s name. This eliminates the decision pressure about rolling over immediately.
Non-Spouse Beneficiaries: Navigating the 10-Year Rule
If you inherit an IRA from someone other than your spouse (and you do not qualify as an eligible designated beneficiary), you must follow the 10-year rule. This requires emptying the entire account by December 31 of the 10th year following the original owner’s death.
The rules became more complex after IRS guidance in 2024. If the original IRA owner died after reaching their required beginning date for RMDs, the non-spouse beneficiary must take annual RMDs in years 1 through 9 and empty the account by year 10. If the owner died before their RBD, the beneficiary has flexibility about when to take money out—as long as everything is gone by year 10.
Scenario: Sarah Inherits Her Mother’s Traditional IRA
Sarah is 45 years old and inherits her mother’s $300,000 Traditional IRA in 2025. Her mother was 78 and had already started RMDs. Sarah must:
| Year | Requirement |
|---|---|
| 2025 | Take mother’s unfulfilled RMD for year of death |
| 2026-2034 | Take annual RMDs based on Sarah’s life expectancy |
| 2035 | Withdraw remaining balance by December 31 |
If Sarah fails to take required distributions, she faces a penalty of up to 25% of the amount she should have withdrawn.
Minor Children: Unique Rules with Time Limits
When a minor child inherits an IRA from a parent, special rules apply. The child receives EDB treatment, meaning they can take distributions over their life expectancy—but only until they reach age 21.
According to IRS final regulations issued in July 2024, the age of 21 applies regardless of state laws setting different ages of majority. This federal rule standardizes treatment across all states.
How it works:
A minor who inherits from a parent must transfer the assets to an inherited IRA and take annual RMDs based on the child’s life expectancy. When the child turns 21, the clock starts on a new 10-year period. The child then has until age 31 to empty the account completely.
Critical distinction: If a minor inherits an IRA from a non-parent (such as a grandparent, aunt, or uncle), they do NOT receive EDB treatment. Instead, they immediately become subject to the 10-year rule, just like any other non-spouse beneficiary.
| Minor Inherits From | Rule Applied |
|---|---|
| Parent | Life expectancy RMDs until age 21, then 10-year rule kicks in |
| Non-Parent (grandparent, etc.) | 10-year rule applies immediately |
Trusts as IRA Beneficiaries: Proceed With Caution
Naming a trust as your IRA beneficiary offers estate planning benefits: protection from creditors, control over how beneficiaries spend money, and avoidance of probate. But trusts create significant complexity under IRA distribution rules.
The IRS distinguishes between qualified (see-through) trusts and non-qualified trusts. A see-through trust meets specific requirements that allow the IRS to look through the trust and treat the underlying human beneficiaries as if they inherited directly.
Requirements for a See-Through Trust:
- The trust must be valid under state law
- The trust must be irrevocable (or become irrevocable upon the owner’s death)
- Beneficiaries must be identifiable from the trust document
- Documentation must be provided to the IRA custodian by October 31 of the year after death
If your trust fails to meet these requirements, it becomes a non-designated beneficiary. The consequence is harsh: the entire IRA must be distributed within 5 years if the original owner died before their RBD.
Two Types of See-Through Trusts:
| Trust Type | How RMDs Work |
|---|---|
| Conduit Trust | RMDs flow through to beneficiaries each year; beneficiaries pay the tax |
| Accumulation Trust | Trust can accumulate RMDs inside; trust pays tax at compressed rates |
Many trusts drafted before the SECURE Act assumed lifetime stretch distributions would be available. If you have an older trust named as your IRA beneficiary, review it with an estate attorney to ensure it still accomplishes your goals under current rules.
Community Property States: Your Spouse May Have Rights You Didn’t Expect
If you live in a community property state, your spouse may have automatic rights to your IRA—even if you name someone else as beneficiary. The nine community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska offers an optional community property regime.
In these states, assets acquired during marriage—including IRA contributions and earnings—are generally considered jointly owned by both spouses. This means your spouse may have a legal claim to half of your IRA regardless of what your beneficiary form says.
Practical Impact:
If you want to name someone other than your spouse as your IRA beneficiary in a community property state, you typically need your spouse’s written consent. Many IRA custodians include a spousal consent section on beneficiary forms for this reason.
If you fail to obtain consent and your spouse claims their community property interest after your death, the named beneficiary could lose up to 50% of the IRA to your spouse’s claim.
| State Type | Spousal Consent for Non-Spouse Beneficiary |
|---|---|
| Community Property State | Typically required |
| Common Law State | Generally not required (but check your IRA agreement) |
Per Stirpes vs. Per Capita: What Happens If a Beneficiary Dies Before You
When naming IRA beneficiaries, you must decide what happens if a beneficiary dies before you do. The terms per stirpes and per capita control this outcome, and choosing incorrectly can devastate your estate plan.
Per Stirpes (“By the Roots”): If a beneficiary predeceases you, their share passes to their descendants (children and grandchildren). The deceased beneficiary’s “branch” of the family tree still receives their portion.
Per Capita (“By the Head”): If a beneficiary predeceases you, their share is divided equally among the remaining surviving beneficiaries. The deceased beneficiary’s descendants receive nothing.
Example: Jane has a $900,000 IRA and names her three children as equal beneficiaries (33.3% each). One child dies before Jane, leaving two grandchildren.
| Designation | Surviving Children Each Receive | Deceased Child’s Children Receive |
|---|---|---|
| Per Stirpes | $300,000 each | $150,000 each (split their parent’s share) |
| Per Capita | $450,000 each | $0 |
Many beneficiary forms have a default setting if you do not specify. Some custodians default to per stirpes; others default to simply dividing among surviving beneficiaries. Always review your form carefully and make an explicit choice.
Completing the IRA Beneficiary Designation Form: A Line-by-Line Guide
Beneficiary designation forms vary by custodian, but most include similar sections and options. Taking time to complete this form correctly prevents costly mistakes.
Section 1: Account Owner Information
Enter your full legal name, address, date of birth, and Social Security number. Some forms require your IRA account number.
Section 2: Primary Beneficiaries
List the people or entities who will receive your IRA assets first. For each beneficiary, you typically provide:
- Full legal name
- Date of birth
- Social Security number or Tax ID
- Relationship to you
- Percentage of account they should receive
- Per stirpes or per capita designation
Section 3: Contingent (Secondary) Beneficiaries
List backup beneficiaries who will receive assets only if all primary beneficiaries predecease you. Use the same information as for primary beneficiaries.
Section 4: Spousal Consent (If Applicable)
In community property states or for certain employer plans, your spouse may need to sign acknowledging they waive rights to the IRA or consent to your beneficiary choices.
Section 5: Signature and Date
Sign the form and date it. Some custodians require notarization or witness signatures.
Critical tip: Keep a copy of every beneficiary form you submit. The IRS places the burden on the taxpayer to prove a beneficiary was designated—not the financial institution.
Three Common Scenarios IRA Owners Face
Scenario 1: Married Couple With Minor Children
Facts: David, age 52, has a $400,000 Traditional IRA. He is married to Maria, and they have two children, ages 8 and 12. David wants Maria to have access to the money if he dies, but also wants to protect the children’s inheritance.
Solution: David names Maria as 100% primary beneficiary. Maria, as his spouse, can roll the IRA into her own name and continue tax-deferred growth. If Maria also dies before the children reach adulthood, David names a trust for the children as contingent beneficiary.
| Decision | Result |
|---|---|
| Primary beneficiary: Maria (spouse) | Maria inherits and can roll to her own IRA |
| Contingent beneficiary: Trust for children | Trust controls distributions to minors if Maria dies first |
Scenario 2: Divorced Account Owner
Facts: Jennifer, age 60, divorced Tom five years ago. Her IRA still names Tom as beneficiary. Jennifer has two adult children she wants to inherit her $250,000 Roth IRA.
Solution: Jennifer must immediately update her beneficiary designation. Divorce does not automatically remove an ex-spouse from beneficiary forms in most states. If Jennifer dies without updating, Tom will inherit the IRA—even though Jennifer’s will leaves everything to her children.
| Decision | Result |
|---|---|
| Remove Tom as beneficiary | Ex-spouse no longer inherits |
| Name children as equal primary beneficiaries | Each child inherits 50% |
| Select “per stirpes” | If one child predeceases Jennifer, that child’s share goes to their descendants |
Scenario 3: Single Person With No Children
Facts: Marcus, age 45, is single with no children. He has a $150,000 Traditional IRA and wants his sister to inherit, but if she dies before him, he wants the money to go to his favorite charity.
Solution: Marcus names his sister as 100% primary beneficiary and the charity as 100% contingent beneficiary. The charity should be identified with its full legal name and tax ID number to avoid confusion.
| Decision | Result |
|---|---|
| Primary: Sister (100%) | Sister inherits if she survives Marcus |
| Contingent: Charity (100%) | Charity inherits if sister predeceases Marcus |
Tax Consequences of Inherited IRAs
Inheriting an IRA creates tax obligations that depend on the IRA type and your relationship to the deceased.
Traditional IRA Distributions:
Withdrawals from an inherited Traditional IRA are taxable as ordinary income at the beneficiary’s current tax rate. The money was contributed pre-tax, so taxes are due when it comes out. The good news: beneficiaries never pay the 10% early withdrawal penalty, regardless of their age.
Roth IRA Distributions:
Inherited Roth IRAs offer significant tax advantages. If the original Roth IRA was open for at least 5 years, withdrawals are generally tax-free. The account still must follow RMD rules (either life expectancy or 10-year rule), but beneficiaries owe no income tax on the distributions.
Example: Tax Impact of a $500,000 Inherited Traditional IRA
| Distribution Strategy | Tax Paid (37% Bracket) | Net to Beneficiary |
|---|---|---|
| Take everything in year 1 | $185,000 | $315,000 |
| Spread evenly over 10 years ($50,000/year) | Lower bracket, less total tax | More net value |
Beneficiaries who inherit large Traditional IRAs should work with a tax professional to strategically time distributions. Taking too much in one year can push you into higher tax brackets and trigger phaseouts of other tax benefits.
The IRD Deduction: Relief From Double Taxation
When an IRA owner dies with a taxable estate, the IRA may be subject to both estate tax and income tax. This seems unfair—and the tax code provides partial relief through the Income in Respect of a Decedent (IRD) deduction.
If estate tax was paid on the IRA, the beneficiary can take an income tax deduction for the portion of estate tax attributable to that IRA. This reduces the income tax burden when distributions are taken.
When does this apply?
For 2025, estates exceeding $13.99 million are subject to federal estate tax. If the deceased’s estate paid estate tax and the IRA was included in that calculation, the IRD deduction becomes available.
| Situation | IRD Deduction Available? |
|---|---|
| Estate paid federal estate tax including IRA | Yes |
| Estate below exemption, no estate tax paid | No |
| IRA passed to spouse (marital deduction used) | No |
| IRA passed to charity (charitable deduction used) | No |
Divorce and IRAs: QDROs and Beneficiary Updates
Divorce creates unique challenges for IRA beneficiaries. Unlike 401(k)s and other employer plans, IRAs are NOT divided by QDRO. Instead, IRAs are transferred pursuant to the divorce decree under Internal Revenue Code Section 408(d)(6).
Key points about divorce and IRAs:
IRAs do not require a QDRO. A Qualified Domestic Relations Order is used for employer-sponsored plans (401(k), pension, 403(b)). IRA transfers between divorcing spouses happen directly under the divorce decree.
Update beneficiary designations immediately. Divorce does not automatically remove your ex-spouse from your IRA beneficiary designation in most states. If you die without updating the form, your ex-spouse inherits.
Transfer incident to divorce is tax-free. When an IRA is transferred to a former spouse as part of a divorce settlement, no taxes or penalties apply to the transfer. The receiving spouse becomes the owner and follows normal IRA rules.
| Plan Type | Document Needed for Divorce Division |
|---|---|
| 401(k), Pension, 403(b) | Qualified Domestic Relations Order (QDRO) |
| Traditional or Roth IRA | Divorce decree; transfer under IRC 408(d)(6) |
Mistakes to Avoid When Naming IRA Beneficiaries
Estate planning attorneys witness the same beneficiary designation errors repeatedly. These mistakes cost families thousands of dollars and create heartache during already difficult times.
Mistake 1: Not Naming Any Beneficiary
Without a named beneficiary, your IRA typically passes to your estate by default. This triggers probate, delays distribution, and eliminates favorable stretch options. More than one-third of all IRA death claims are processed without a beneficiary identified.
Consequence: Estate administration costs, delayed access to funds, potentially less favorable distribution rules.
Mistake 2: Naming Your Estate as Beneficiary
Some people intentionally name their estate, thinking it simplifies things. This is almost always a mistake. An estate is a non-designated beneficiary, which means the 5-year distribution rule applies (if the owner died before their RBD).
Consequence: Accelerated distributions, faster depletion of tax-advantaged growth, potential for higher taxes.
Mistake 3: Naming a Minor Child Directly
While minors can be IRA beneficiaries, they cannot legally manage financial accounts. A custodian must be appointed, and a court may need to supervise until the child reaches adulthood. This creates expense and complexity.
Consequence: Court involvement, legal fees, potential for mismanagement.
Mistake 4: Forgetting to Update After Life Changes
Marriage, divorce, birth of children, death of a beneficiary—all require beneficiary form updates. The designation you made 20 years ago may not reflect your current wishes.
Consequence: Wrong person inherits, family conflict, defeated estate planning intentions.
Mistake 5: Assuming Your Will Controls
Your will does NOT control IRA distributions. The beneficiary form controls. Even explicit language in your will cannot override a beneficiary designation.
Consequence: Assets go to unintended recipients, legal disputes, family discord.
Do’s and Don’ts of IRA Beneficiary Planning
| Do’s | Why |
|---|---|
| Review beneficiary forms every 2-3 years | Life changes require updates |
| Keep copies of all submitted beneficiary forms | You bear the burden of proof |
| Coordinate beneficiary designations with your will | Ensures consistent estate plan |
| Consider tax brackets of your beneficiaries | Lower-bracket heirs pay less tax |
| Name contingent beneficiaries | Provides backup if primary dies first |
| Don’ts | Why |
|---|---|
| Don’t name your estate as beneficiary | Triggers probate and unfavorable distribution rules |
| Don’t name minors directly without a trust | Creates legal complexity and court supervision |
| Don’t forget spousal consent in community property states | Spouse may have legal claims |
| Don’t assume divorce removes ex-spouse | Must manually update beneficiary form |
| Don’t rely solely on verbal instructions | Only written beneficiary forms are legally binding |
Pros and Cons of Using IRA Beneficiary Designations
| Pros | Cons |
|---|---|
| Bypasses probate—faster access to funds | Overrides will—can create unintended results |
| Simple to set up—usually just one form | Easy to forget to update after life changes |
| Private transfer—no public court records | Cannot include conditions (like age requirements) |
| Maintains tax-advantaged status of account | Complex rules for trusts and non-individual beneficiaries |
| Beneficiary controls timing of distributions (within rules) | 10-year rule creates pressure to distribute faster |
Roth IRA Beneficiaries: Special Tax Advantages
Roth IRAs provide unique benefits for beneficiaries. Because contributions were made with after-tax dollars, qualified distributions are completely tax-free.
The 5-Year Rule for Inherited Roth IRAs:
For earnings to be tax-free, the Roth IRA must have been open for at least 5 years as of the date the original owner died. If the account is newer, earnings (but not contributions) may be taxable when distributed.
RMD Requirements Still Apply:
Even though Roth IRA distributions are tax-free, inherited Roth IRAs are subject to the same distribution rules as inherited Traditional IRAs. Non-spouse beneficiaries must empty the account within 10 years (if not an EDB) and may need to take annual RMDs.
Why Roth IRAs Make Great Inheritance Vehicles:
Because beneficiaries pay no income tax on distributions, a Roth IRA allows for maximum wealth transfer. A $500,000 inherited Traditional IRA might net $315,000 after taxes; the same amount in a Roth IRA delivers the full $500,000.
SEP and SIMPLE IRAs: Similar Rules Apply
SEP (Simplified Employee Pension) and SIMPLE (Savings Incentive Match Plan for Employees) IRAs follow the same beneficiary rules as Traditional IRAs. These employer-sponsored IRA types offer the same beneficiary designation options.
When an owner of a SEP or SIMPLE IRA dies, the named beneficiary can transfer the assets to an inherited IRA. The same distribution rules apply: spouses have maximum flexibility, EDBs can stretch over life expectancy, and other non-spouse beneficiaries follow the 10-year rule.
One exception: SIMPLE IRAs have a 2-year rule for certain transactions. If the original owner participated in the SIMPLE plan for less than 2 years before death, some transfer options may be limited.
What If No Beneficiary Is Named? Default Rules Kick In
When an IRA owner dies without a valid beneficiary designation, the IRA agreement’s default provisions control. Most custodians default to the owner’s estate. This triggers several negative consequences.
The estate is NOT a designated beneficiary. Because an estate is not a human being, it cannot use the life expectancy distribution method. If the owner died before their RBD, the 5-year rule applies. The entire account must be distributed within 5 years.
Probate becomes involved. The IRA assets pass through the estate, requiring probate court proceedings. This creates delays, legal fees, and public records.
Intended beneficiaries may lose out. Without a named beneficiary, state intestacy laws determine who inherits the estate. This may not match your wishes.
Frequently Asked Questions
Can I name multiple beneficiaries for my IRA?
Yes. You can name as many primary and contingent beneficiaries as you wish, assigning each a specific percentage of your account.
Does my IRA beneficiary designation override my will?
Yes. The beneficiary designation is a contract with your IRA custodian that legally supersedes any conflicting instructions in your will.
Can I change my IRA beneficiary at any time?
Yes. Beneficiary designations are revocable. You can update them as often as you want during your lifetime by submitting a new form to your custodian.
Does divorce automatically remove my ex-spouse as IRA beneficiary?
No. In most states, you must manually update your beneficiary form. Some states have laws that revoke ex-spouse designations, but you should not rely on them.
Can a trust be an IRA beneficiary?
Yes. However, trusts must meet specific IRS requirements to qualify as see-through trusts. Non-qualifying trusts face the 5-year distribution rule.
Do inherited IRAs have required minimum distributions?
Yes. All beneficiaries must take distributions according to either the life expectancy method or the 10-year rule, depending on their relationship to the deceased.
Is the 10% early withdrawal penalty waived for inherited IRAs?
Yes. Beneficiaries never pay the 10% early withdrawal penalty on inherited IRA distributions, regardless of their age.
Can I disclaim an inherited IRA?
Yes. You can refuse to accept an inherited IRA through a qualified disclaimer. The assets then pass to the next beneficiary in line as if you predeceased the owner.
Do community property states affect IRA beneficiaries?
Yes. In community property states, your spouse may have automatic rights to IRA assets acquired during marriage, potentially overriding your beneficiary designation.
What happens if my primary beneficiary dies before me?
It depends on your form. With per stirpes, the deceased beneficiary’s share goes to their descendants. With per capita (or standard default), the share is divided among remaining beneficiaries.
Are Roth IRA distributions taxable to beneficiaries?
No. Qualified distributions from inherited Roth IRAs are tax-free, provided the account was open at least 5 years.
Can I roll an inherited IRA into my own IRA?
Only if you are a surviving spouse. Non-spouse beneficiaries cannot roll inherited IRA assets into their own IRAs; they must keep the assets in an inherited IRA.
What is the deadline to set up an inherited IRA?
Beneficiaries should establish the inherited IRA and begin distributions by December 31 of the year following the original owner’s death to preserve maximum distribution options.
Can a charity be an IRA beneficiary?
Yes. Naming a charity creates a tax-efficient gift because charities pay no income tax on IRA distributions. Use the charity’s exact legal name and tax ID on the form.
What if the IRA custodian lost my beneficiary form?
You bear the burden of proof. The IRS holds the taxpayer responsible for proving a beneficiary was designated, not the financial institution. Keep copies of all forms.