IRA & Beneficiary Rules of Succession

by Luke Arthur ; Updated July 27, 2017

When you open an individual retirement account (IRA), the IRA provider will require you to name a beneficiary for the account. If you pass away before withdrawing the money in the account, it will go to the beneficiary you name. When your beneficiary receives access to the account, he has a few options to consider.

Specifying the Beneficiary

When you set up your account or if your situation changes, you need to name the proper beneficiary for your account. Fill out a beneficiary form with your IRA provider, and list the name, address and phone number of the person you want to have your account. You can also name contingent beneficiaries, who can inherit the account if your primary beneficiary is not able to do so.

Inherited IRA Rules

The beneficiary's relationship to the deceased person plays a role in what the beneficiary can do with the IRA funds. If you were married to the person who died, you can roll the funds from the IRA into your own IRA and continue saving. If you were not married to the deceased person, you cannot mix the funds with your own retirement funds. In that case, you must keep the IRA intact and take distributions from it.

Duration of Distributions

If you, as the beneficiary, were not the spouse of the deceased IRA owner, you must take distributions (withdrawals) from it over a certain period. If the deceased had not started taking required minimum distributions (RMDs) from the account, you need to take distributions so all the money is withdrawn from the account within five years. If the account holder had already begun to take RMDs, you will have the option to take distributions based on your life expectancy.

Transferring the IRA

If the IRA is held by a custodian with which you do not feel comfortable, you have the option of transferring to another provider. For example, some providers do not allow you to take distributions over the course of your life expectancy. In this case, you can transfer the funds to a provider that does. You simply need to fill out a transfer form with your custodian and open a new IRA with another provider. The money will be transferred from one custodian to the other in a trustee-to-trustee transfer.

About the Author

Luke Arthur has been writing professionally since 2004 on a number of different subjects. In addition to writing informative articles, he published a book, "Modern Day Parables," in 2008. Arthur holds a Bachelor of Science in business from Missouri State University.