Who is the beneficiary of an inherited IRA?

The individual inheriting the Individual Retirement Account (IRA) (the beneficiary) may be anyone—a spouse, relative, unrelated party, or entity (e.g., estate or trust). Rules on how to handle an inherited IRA differ for spouses and non-spouses, however. Learn more about how inherited IRAs work.

What are inherited IRAs?

The IRAs created by means of a trustee-to-trustee transfer, which will be titled in the decedent’s name for the benefit of each child as a beneficiary of the decedent’s estate, constitute inherited IRAs. The children may each receive distributions required from the specific beneficiary IRA over the decedent's remaining life expectancy.

Can an estate be a designated beneficiary of an IRA?

An estate can’t be a designated beneficiary because it doesn’t have a quantifiable life expectancy ( Treasury Regulations Section 1.401 (a) (9)-4, Q&A 3). Accordingly, if an estate is named as beneficiary of an IRA, distributions must be taken out pursuant to the five-year rule if the IRA owner died before his RBD.