What’s Possible and Not Possible When Naming an IRA Beneficiary

In addition to saving funds for retirement, providing for loved ones or charities is another benefit of an IRA. The IRS provides information regarding the rules related to an inherited IRA.

Who can be an IRA beneficiary?

The options can vary depending on a number of factors such as the type of retirement account, the date the account was established, and the relationship of the beneficiary to the account holder.

In addition to naming a person as beneficiary (often a spouse, children or other individual), non-individuals such as trusts and charities can be named as IRA beneficiaries.

The IRS description of a trust:

“In general, a trust is a relationship in which one person holds title to property, subject to an obligation to keep or use the property for the benefit of another. A trust is formed under state law. You may wish to consult the law of the state in which the organization is organized. Note that for a trust to qualify under section 501(c)(3) of the Code, its organizing document must contain certain language. Publication 557 contains suggested language.”

The IRS has numerous resources regarding charitable organizations and organizations using funds or assets for charitable purposes. For example, some organizations are considered public charities while others are private foundations.

Making sure your account’s beneficiary information is up to date is important, as LegalZoom points out. Otherwise, your assets could end up going to someone you didn’t intend to receive them when you do pass away.

“Check your beneficiary designations from time to time to make sure they are what you intend them to be. Also, ensure you have an alternate beneficiary in case your primary beneficiary predeceases you. You should check all of your estate planning documents every few years—and the same goes for beneficiary designations.”