Naming a beneficiary is an essential component of responsibly managing your retirement accounts. When opening a retirement account, you're asked to choose primary and secondary beneficiaries. These are the people or entities who will receive your account's assets when you die.

If you have accounts with large balances or at different financial institutions, consulting a financial advisor can help distribute your funds as you intended in a way that limits the taxes paid by your beneficiaries. If you don't establish any beneficiaries before you die, your assets will be given to your estate and could be tied up in court.

When it comes to beneficiaries for Individual Retirement Accounts (IRAs), the exact amount of money distributed depends on whether the beneficiary is a spouse or a non-spouse.

Beneficiary Distribution Options for Traditional* & Roth IRAs

Spouse is Sole Beneficiary

  • IRA distributions must begin by the later of:
    • Dec. 31 of the year following the IRA owner's death
    • Dec. 31 of the year the IRA owner would have turned 70½
  • IRA is paid out in full and must be completely distributed within 5 years of IRA owner's death.
  • Beneficiary accepts IRA funds as their own, and amount is incorporated into the beneficiary's IRA. Beneficiary may convert these funds from a Roth to a Traditional IRA.
  • Distribution is recalculated yearly using the spouse beneficiary's single life expectancy.

Spouse is Not Sole Beneficiary

  • IRA distributions must begin by Dec. 31 of the year following the IRA owner's death.
  • IRA is paid out in full and must be completely distributed within 5 years of IRA owner's death.
  • Spouse and beneficiaries accept funds as their own, and amounts are incorporated into their respective IRAs.
  • Distribution is determined using the single life expectancy of each beneficiary in the year following the IRA owner's death. Future-year distributions use non-recalculation.

Non-Spouse Beneficiary

  • IRA distributions must begin by Dec. 31 of the year following the IRA owner's death.
  • IRA is paid out in full and must be completely distributed within 5 years of IRA owner's death.
  • Beneficiary accepts funds as their own, and amount is incorporated into the beneficiary's IRA.
  • Distribution is determined using the single life expectancy of each beneficiary in the year following the IRA owner's death. Future-year distributions use non-recalculation.

Non-Individual

(Non-qualified Trust, Estates and Entities)
  • IRA is paid out in full and must be completely distributed within 5 years of IRA owner's death.
*These options only apply to Traditional IRAs if a Required Minimum Distribution is not required by IRS regulation.
Beneficiary Distributions for Traditional IRAs On or After the Required Minimum Distribution Payouts Begin

Spouse is Sole Beneficiary

  • IRA paid out in full and distributions must begin by Dec. 31 of the year following the IRA owner's death.
  • Beneficiary accepts IRA funds as their own, and amount is incorporated into the beneficiary's IRA.
  • Distributions are calculated using the longer of:
    • Spouse beneficiary's single life expectancy of oldest beneficiary during the year of death. Future-year distributions use non-recalculation.
    • The IRA owner's single life expectancy, subtracted by one. Future-year distributions are non-recalculated using the IRA owner's life expectancy.

Spouse is Not Sole Beneficiary

  • IRA paid out in full and distributions must begin by Dec. 31 of the year following the IRA owner's death.
  • Spouse and beneficiaries accept funds as their own, and amounts are incorporated into their respective IRAs.
  • Distributions are calculated using the longer of:
    • Spouse beneficiary's single life expectancy of oldest beneficiary during the year of death. Future-year distributions use non-recalculation.
    • The IRA owner's single life expectancy, subtracted by one. Future-year distributions are non-recalculated using the IRA owner's life expectancy.

Non-Spouse Beneficiary

  • Distributions are calculated using the longer of:
    • Beneficiary's single life expectancy of oldest beneficiary during the year of death. Future-year distributions use non-recalculation.
    • The IRA owner's single life expectancy, subtracted by one. Future-year distributions use non-recalculation.

Non-Individual

(Non-qualified Trust, Estates and Entities)
  • IRA paid out in full and distributions must begin by Dec. 31 of the year following the IRA owner's death.
  • Distributions are calculated using the IRA owner's single life expectancy, subtracted by one. Future-year distributions use non-recalculation.

This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.