Do you want assets in your IRA to go to more than one person or entity? Naming multiple beneficiaries is a smart and efficient way to do that without the added paperwork or fees of creating separate accounts.

But to ensure each beneficiary gets what you intend (and avoids unnecessary tax headaches), there are five critical things to keep in mind.

1. Mark the Due Date for Designated Beneficiaries

September 30 of the year following the IRA owner’s death is the key date. That’s when designated beneficiaries are determined for post-death options like stretch IRA distributions or the 10-year payout rule. Anyone not identified by this date won’t qualify for those benefits.

2. Remove Non-Designated Beneficiaries in Time

Non-designated beneficiaries—like charities, estates, and non-qualifying trusts—should be cashed out before September 30. These entities don’t have life expectancies, and if they remain on the account too long, they can disqualify eligible individuals from stretching distributions over time.

3. Set Up Separate Inherited IRA Accounts

Each designated beneficiary should have their own separate inherited IRA account established and funded by December 31 of the year following the account owner’s death. These accounts must:

  • Include the original IRA owner’s name in the title,
  • Clearly identify them as “inherited” or “beneficiary” accounts, and
  • Use the beneficiary’s Social Security Number for reporting

4. Maximize the Stretch Strategy

If each eligible designated beneficiary has a separate account by the deadlines above, they can use their own single life expectancy to stretch out required minimum distributions. This life expectancy is calculated in the year after the IRA owner’s death, then reduced by one each year (unless the sole beneficiary is a spouse, who can re-determine each year).

5. Know the Risk of Missing These Deadlines

If you don’t split the account in time or fail to cash out non-designated beneficiaries, designated beneficiaries may lose the ability to stretch distributions—and instead face a 10-year payout rule. That could mean faster withdrawals, higher taxes, and less long-term growth.

Need Help Naming IRA Beneficiaries the Right Way?

Managing an inherited IRA can be overwhelming, but you don’t have to do it alone. At Prosperity Capital Advisors, we specialize in complex retirement and legacy planning, seamlessly incorporating the moving parts of your financial picture into one clear, concise blueprint.

Our Bucket Plan Certified® advisors can help you:

  • Avoid costly mistakes with IRA beneficiary setup
  • Align your designations with your broader estate and financial plan
  • Ensure your loved ones are protected and your wishes honored

Find an advisor today, and let’s take the guesswork out of planning your legacy.

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This material was developed and produced by Ed Slott and Company, LLC to provide information on a topic that may be of interest. Ed Slott and Company, LLC is not affiliated with The JL Smith Group or Prosperity Capital Advisors (Prosperity).