Naming a Minor as Your IRA Beneficiary

While naming an adult beneficiary for your IRA is straightforward, designating a minor requires careful planning and specific legal considerations. Learn how to protect your legacy and ensure your retirement assets safely pass to the next generation.

Children drawing with chalk, representing future inheritance planning

Leaving retirement assets to minors requires special legal and financial planning considerations.

Understanding Guardianship Requirements

When a minor inherits an IRA, they cannot legally make financial decisions about the account. This creates several important considerations:

A guardian may need to be appointed to manage the inherited assets
Parents can designate guardians in their will
Some IRA beneficiary forms allow direct guardian nominations
Court-appointed guardianship is possible but can be costly and time-consuming

Using Custodial Accounts for Minor Beneficiaries

A practical solution is naming a custodial account as the IRA beneficiary. Two main options exist:

Uniform Gifts to Minors Act (UGMA) accounts
Uniform Transfers to Minors Act (UTMA) accounts

The specific type depends on your state's laws. When establishing these accounts, you'll name both the custodial account and its custodian on the IRA beneficiary form.

Trust Strategies for Larger IRAs

For substantial IRA balances, establishing a trust for your minor beneficiary offers enhanced control and protection. Key considerations include:

The SECURE Act maintains "look-through trust" rules from previous legislation
Conduit trusts for minor children allow RMD stretching until age 21
The 10-year distribution rule applies after the child reaches 21
Trust rules for inherited IRA distributions can be complex

Securing Your Legacy Through Proper Planning

Protecting your lifetime of savings requires careful consideration when naming minor beneficiaries. Consider these options:

Establish UGMA/UTMA accounts with designated custodians
Create a trust with specific provisions for minor beneficiaries
Work with qualified advisors to navigate complex RMD rules

Need help? Schedule Your Legacy Planning Session.

Source: Sarah Brenner, JD
Director of Retirement Education Ed Slott and Company, LLC Copyright © 2023, Ed Slott and Company, LLC Reprinted from The Slott Report, 03/06/23, with permission. https://www.irahelp.com/slottreport/naming-minor-your-ira-beneficiary, Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article. Chris Cordoba, founder of California Retirement Advisors, is a member of Ed Slott's Master Elite IRA Advisor Group.

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