A:

Whether the beneficiary of an individual retirement account (IRA) can name a successor beneficiary (second generation beneficiary) is determined by the provisions of the IRA plan document. In the last few years, most IRA plan documents that did not allow this option have been amended to allow beneficiaries to designate a succession of beneficiaries. Check with your IRA custodian regarding its IRA plan document provisions. If your current IRA custodian does not allow this option, you may be allowed to transfer your inherited IRA to one that does.

The life expectancy of the first generation beneficiary is always used to compute post-death distributions. This rule applies to second and subsequent generations of beneficiaries. For instance, if your child was the beneficiary of your inherited IRA and the child later designated someone else as the beneficiary of the IRA he or she inherited from you, then you, your child and the person he or she designated as beneficiary would all use your life expectancy to calculate required minimum distribution (RMD) amounts. (For more information on retirement plans, see Introductory Tour Through Retirement Plans. For more on RMDs, see Avoiding RMD Pitfalls.)

This question was answered by Denise Appleby
(Contact Denise)

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