Navigating the rules for qualified wealth transfer
Do you have clients who have inherited an Individual Retirement Account (IRA)? The tax-deferred assets in an inherited IRA can become a valuable source of financial security, but the rules can also be complex.
So, what comes next? The concept of a “stretch IRA” — a wealth transfer technique that may allow the benefits of an IRA to stretch across several generations — is one potential option.
Use our interactive guide to help clients understand distribution requirements, tax implications, and available strategies based on their specific circumstances. As you have conversations about inherited IRA, your clients should also seek the advice of their tax professional to ensure the proper handling of their unique situation.
IRA Beneficiary Guide
Complete this form and use our guide to learn more about discussing Inherited IRAs with your clients.
IRA Beneficiary Guide
Inherited IRAs offer many potential benefits. Use our guide to learn about different options available when you inherit an IRA. Follow the steps below to build your beneficiary profile and learn more about the IRS rules for an inherited IRA.
Step 1: Select Relationship to IRA Owner
Step 2: Select Market Type
Step 3: Death of Original IRA Owner
Step 4: Original IRA Owner Age at Time of Death
Option 1: Treat yourself as a beneficiary
Stretch IRA: Take Required Minimum Distributions based on the beneficiary’s single life expectancy.
Distributions can start at the later of:
- December 31 of the year following the IRA owner’s date of death
December 31 of the year the deceased IRA owner would have reached age 73
Option 2: Treat as your own IRA, by designating yourself as the account owner.
If you are the sole beneficiary of your deceased spouse's IRA, you can elect to be treated as the owner of the IRA and not as the beneficiary. By selecting to be treated as the owner, you determine the required minimum distribution as if you were the owner.
Option 3: Treat as your own, by rolling over into your IRA
Option 1: Treat yourself as a beneficiary
Stretch IRA: Take Required Minimum Distributions based on the longer of:
- your own life expectancy
The original IRA owner’s life expectancy
Option 2: Treat as your own IRA, by designating yourself as the account owner.
If you are the sole beneficiary of your deceased spouse's IRA, you can elect to be treated as the owner of the IRA and not as the beneficiary. By selecting to be treated as the owner, you determine the required minimum distribution as if you were the owner.
Option 3: Treat as your own, by rolling over into your IRA
Step 4: Original IRA Owner Age at Time of Death
Step 5: Select your Beneficiary Category
Step 5: Select your Beneficiary Category
Option 1: Treat yourself as a beneficiary
A. Stretch IRA: Take Required Minimum Distributions based on the beneficiary’s single life expectancy.
Distributions can start at the later of:
- December 31 of the year following the IRA owner’s date of death
December 31 of the year the deceased IRA owner would have reached age 73
B. Follow the 10-year rule: The full value of the IRA must be distributed by December 31 of the year that includes the 10th anniversary of the date of death. There are no Required Minimum Distributions (RMDs) during the 10-year period.
Option 2: Treat as your own IRA, by designating yourself as the account owner.
If you are the sole beneficiary of your deceased spouse's IRA, you can elect to be treated as the owner of the IRA and not as the beneficiary. By selecting to be treated as the owner, you determine the required minimum distribution as if you were the owner.
Option 3: Treat as your own, by rolling over into your IRA
Option 1: Treat yourself as a beneficiary
Stretch IRA: Take Required Minimum Distributions based on the longer of:
- your own life expectancy
the original IRA owner’s life expectancy
Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
Option 2: Treat as your own IRA, by designating yourself as the account owner.
If you are the sole beneficiary of your deceased spouse's IRA, you can elect to be treated as the owner of the IRA and not as the beneficiary. By selecting to be treated as the owner, you determine the required minimum distribution as if you were the owner.
Option 3: Treat as your own, by rolling over into your IRA
Step 3: Death of Original IRA Owner
Step 4: Select your Beneficiary Category
Option 1: Treat yourself as a beneficiary
A. Stretch IRA: Take Required Minimum Distributions based on the beneficiary’s single life expectancy.
Distributions can start at the later of:
- December 31 of the year following the IRA owner’s date of death
December 31 of the year the deceased IRA owner would have reached age 73
B. Follow the 10-year rule: The full value of the Inherited Roth IRA must be distributed by December 31 of the year that includes the 10th anniversary of the date of death. There are no Required Minimum Distributions (RMDs) during the 10-year period.
Option 2: Treat as your own Roth IRA, by designating yourself as the account owner.
If you are the sole beneficiary of your deceased spouse's Roth IRA, you can elect to be treated as the owner of the Roth IRA and not as the beneficiary.
Option 3: Treat as your own, by rolling over into your Roth IRA
Option 1: Treat yourself as a beneficiary
Stretch IRA: Take Required Minimum Distributions based on the beneficiary’s single life expectancy
Distributions can start at the later of
- December 31 of the year following the IRA owner’s date of death
December 31 of the year the deceased IRA owner would have reached age 73
Option 2: Treat as your own Roth IRA, by designating yourself as the account owner
If you are the sole beneficiary of your deceased spouse's IRA, you can elect to be treated as the owner of the Roth IRA and not as the beneficiary.
Option 3: Treat as your own, by rolling over into your Roth IRA
Step 2: Select Market Type
Step 3: Death of Original IRA Owner
Step 4: Original IRA Owner Age at Time of Death
Stretch IRA: Take Required Minimum Distributions based on the beneficiary’s single life expectancy. Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
Stretch IRA: Take Required Minimum Distributions based on the longer of:
•your own life expectancy
•the original IRA owner’s life expectancy
Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
Step 4: Original IRA Owner Age at Time of Death
Step 5: Select your Beneficiary Category
Step 5: Select your Beneficiary Category
A. Stretch IRA: Take Required Minimum Distributions based on the beneficiary’s single life expectancy. Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
B. Follow the 10-year rule: The full value of the IRA must be distributed by December 31 of the year that includes the 10th anniversary of the date of death. There are no Required Minimum Distributions (RMDs) during the 10-year period.
Special rule for Minors
When the beneficiary is the minor child of the IRA owner:
- The child must take life expectancy-based payments until they reach the age of majority plus 10 years.
- The IRS has determined the age of majority to be 21, allowing the minor child until age 31 to withdraw the entire balance of the account.
- Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
Follow the 10-year rule: The full value of the IRA must be distributed by December 31 of the year that includes the 10th anniversary of the date of death. There are no Required Minimum Distributions (RMDs) during the 10-year period.
Follow the 5-year rule: The full value of the IRA must be distributed by December 31 of the year that includes the 5th anniversary of the date of death. There are no Required Minimum Distributions (RMDs) during the 5-year period.
Stretch IRA: Take Required Minimum Distributions based on the longer of:
- your own life expectancy
the original IRA owner’s life expectancy
Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
Special rule for Minors
When the beneficiary is the minor child of the IRA owner:
- The child may take life expectancy-based payments until they reach the age of majority plus 10 years.
- The IRS has determined the age of majority to be 21, allowing the minor child until age 31 to withdraw the entire balance of the account.
- Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
Follow the 10-year rule: The full value of the IRA must be distributed by December 31 of the year that includes the 10th anniversary of the date of death.
Take Required Minimum Distributions based on the longer of:
- your own life expectancy
the original IRA owner’s life expectancy
Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
Stretch IRA: Distributions required based on the original IRA owner’s remaining life expectancy starting by December 31 of the year following the IRA owner’s death.
Step 3: Death of Original IRA Owner
Step 4: Select your Beneficiary Category
A. Stretch IRA: Take Required Minimum Distributions based on the beneficiary’s single life expectancy. Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
B. Follow the 10-year rule: The full value of the Roth IRA must be distributed by December 31 of the year that includes the 10th anniversary of the date of death. There are no Required Minimum Distributions (RMDs) during the 10-year period.
Special rule for Minors
When the beneficiary is the minor child of the Roth IRA owner:
- The child must take life expectancy-based payments until they reach the age of majority plus 10 years.
- The IRS has determined the age of majority to be 21, allowing the minor child until age 31 to withdraw the entire balance of the account.
Follow the 10-year rule: The full value of the Roth IRA must be distributed by December 31 of the year that includes the 10th anniversary of the date of death. There are no Required Minimum Distributions (RMDs) during the 10-year period.
Follow the 5-year rule: The full value of the Roth IRA must be distributed by December 31 of the year that includes the 5th anniversary of the date of death. There are no Required Minimum Distributions (RMDs) during the 5-year period.
Stretch IRA: Take Required Minimum Distributions based on the beneficiary’s single life expectancy. Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
Step 2: Select Market Type
Step 3: Death of Original IRA Owner
Step 4: Original IRA Owner Age at Time of Death
Step 4: Original IRA Owner Age at Time of Death
Step 5: Select your Beneficiary Category
Step 5: Select your Beneficiary Category
All trust beneficiaries must be EDBs (if multiple trust beneficiaries where one or more is not an EBD must treat all as DB. See DB options)
A. Stretch IRA: Take Required Minimum Distributions based on the oldest trust beneficiary’s life expectancy. Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
B. Follow the 10-year rule: The full value of the IRA must be distributed by December 31 of the year that includes the 10th anniversary of the IRA owner’s date of death. There are no Required Minimum Distributions (RMDs) during the 10-year period.
The beneficiaries of certain trusts can be treated as having been designated beneficiaries for purposes of determining Required Minimum Distributions after the owner’s death if that trust qualifies as a see-through trust, and all the following are true:
- Trust is a valid trust under state law
- The trust is irrevocable or became irrevocable upon the owner's death
- The beneficiaries of the trust are identifiable from the trust document
The trustee of the trust provides the IRA custodian or trustee with the documentation required by that custodian or trustee
The IRS has deemed that if a see-through trust is to be divided immediately into separate sub-trusts for the separate interests of multiple beneficiaries, each individual see-through trust may hold directly the beneficiary’s portion of the inherited IRA and allow for separate accounting of that portion for that beneficiary.
If at least one beneficiary is a DB, must treat all as DB. (If all beneficiaries are EDBs, see EDB options)
Follow the 10-year rule: The full value of the IRA must be distributed by December 31 of the year that includes the 10th anniversary of the IRA owner’s date of death. There are no Required Minimum Distributions (RMDs) during the 10-year period.
The beneficiaries of certain trusts can be treated as having been designated beneficiaries for purposes of determining Required Minimum Distributions after the owner’s death if that trust qualifies as a see-through trust, and all the following are true:
- Trust is a valid trust under state law
- The trust is irrevocable or became irrevocable upon the owner's death
- The beneficiaries of the trust are identifiable from the trust document
The trustee of the trust provides the IRA custodian or trustee with the documentation required by that custodian or trustee
The IRS has deemed that if a see-through trust is to be divided immediately into separate sub-trusts for the separate interests of multiple beneficiaries, each individual see-through trust may hold directly the beneficiary’s portion of the inherited IRA and allow for separate accounting of that portion for that beneficiary.
All trust beneficiaries must be EDBs (if multiple trust beneficiaries where one or more is not an EBD must treat all as DB. See DB options)
Stretch IRA: Take Required Minimum Distributions based on the longer of:
- the oldest trust beneficiary's life expectancy
the original IRA owner’s life expectancy
Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
The beneficiaries of certain trusts can be treated as having been designated beneficiaries for purposes of determining Required Minimum Distributions after the owner’s death if that trust qualifies as a see-through trust, and all the following are true:
- Trust is a valid trust under state law
- The trust is irrevocable or became irrevocable upon the owner's death
- The beneficiaries of the trust are identifiable from the trust document
The trustee of the trust provides the IRA custodian or trustee with the documentation required by that custodian or trustee
The IRS has deemed that if a see-through trust is to be divided immediately into separate sub-trusts for the separate interests of multiple beneficiaries, each individual see-through trust may hold directly the beneficiary’s portion of the inherited IRA and allow for separate accounting of that portion for that beneficiary.
If at least one beneficiary is a DB must treat all as DB. If all beneficiaries are EDBs, see EDB options)
Follow the 10-year rule: The full value of the IRA must be distributed by December 31 of the year that includes the 10th anniversary of the date of death.
Take Required Minimum Distributions based on the longer of:
the oldest trust beneficiary's life expectancy
the original IRA owner’s life expectancy
Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
The beneficiaries of certain trusts can be treated as having been designated beneficiaries for purposes of determining Required Minimum Distributions after the owner’s death if that trust qualifies as a see-through trust, and all the following are true:
- Trust is a valid trust under state law
- The trust is irrevocable or became irrevocable upon the owner's death
- The beneficiaries of the trust are identifiable from the trust document
The trustee of the trust provides the IRA custodian or trustee with the documentation required by that custodian or trustee
The IRS has deemed that if a see-through trust is to be divided immediately into separate sub-trusts for the separate interests of multiple beneficiaries, each individual see-through trust may hold directly the beneficiary’s portion of the inherited IRA and allow for separate accounting of that portion for that beneficiary.
Stretch IRA: Take Required Minimum Distributions based on the oldest trust beneficiary's single life expectancy. Required Minimum Distributions must start by December 31 of the year following the IRA owner's death.
If the sole beneficiary is the spouse:
- Distributions can start at the later of:
- December 31 of the year following the IRA owner’s date of death
- December 31 of the year the deceased IRA owner would have reached age 73
The beneficiaries of certain trusts can be treated as having been designated beneficiaries for purposes of determining Required Minimum Distributions after the owner’s death if that trust qualifies as a see-through trust, and all the following are true:
- Trust is a valid trust under state law
- The trust is irrevocable or became irrevocable upon the owner's death
- The beneficiaries of the trust are identifiable from the trust document
The trustee of the trust provides the IRA custodian or trustee with the documentation required by that custodian or trustee
The IRS has deemed that if a see-through trust is to be divided immediately into separate sub-trusts for the separate interests of multiple beneficiaries, each individual see-through trust may hold directly the beneficiary’s portion of the inherited IRA and allow for separate accounting of that portion for that beneficiary.
Stretch IRA: Take Required Minimum Distributions based on the longer of:
- the original IRA owner’s life expectancy
the oldest trust beneficiary’s life expectancy
Required Minimum Distributions must start by December 31 of the year following the IRA owner's death
The beneficiaries of certain trusts can be treated as having been designated beneficiaries for purposes of determining Required Minimum Distributions after the owner’s death if that trust qualifies as a see-through trust, and all the following are true:
- Trust is a valid trust under state law
- The trust is irrevocable or became irrevocable upon the owner's death
- The beneficiaries of the trust are identifiable from the trust document
The trustee of the trust provides the IRA custodian or trustee with the documentation required by that custodian or trustee
The IRS has deemed that if a see-through trust is to be divided immediately into separate sub-trusts for the separate interests of multiple beneficiaries, each individual see-through trust may hold directly the beneficiary’s portion of the inherited IRA and allow for separate accounting of that portion for that beneficiary.
Step 3: Death of Original IRA Owner
Stretch IRA: Take Required Minimum Distributions based on the oldest trust beneficiary's single life expectancy. Required Minimum Distributions must start by December 31 of the year following the Roth IRA owner's death
If the sole beneficiary is the spouse:
- Distributions can start at the later of:
- December 31 of the year following the IRA owner’s date of death
- December 31 of the year the deceased IRA owner would have reached age 73
The beneficiaries of certain trusts can be treated as having been designated beneficiaries for purposes of determining Required Minimum Distributions after the owner’s death if that trust qualifies as a see-through trust, and all the following are true:
- Trust is a valid trust under state law
- The trust is irrevocable or became irrevocable upon the owner's death
- The beneficiaries of the trust are identifiable from the trust document
The trustee of the trust provides the IRA custodian or trustee with the documentation required by that custodian or trustee
The IRS has deemed that if a see-through trust is to be divided immediately into separate sub-trusts for the separate interests of multiple beneficiaries, each individual see-through trust may hold directly the beneficiary’s portion of the inherited IRA and allow for separate accounting of that portion for that beneficiary.
Step 4: Select your Beneficiary Category
All trust beneficiaries must be EDBs (if multiple trust beneficiaries where one or more is not an EBD must treat all as DB. See DB options)
A. Stretch IRA: Take Required Minimum Distributions based on the oldest trust beneficiary’s life expectancy starting by December 31 of the year following the IRA owner's death
B. Follow the 10-year rule: The full value of the IRA must be distributed by December 31 of the year that includes the 10th anniversary of the IRA owner’s date of death. There are no Required Minimum Distributions (RMDs) during the 10-year period.
The beneficiaries of certain trusts can be treated as having been designated beneficiaries for purposes of determining Required Minimum Distributions after the owner’s death if that trust qualifies as a see-through trust, and all the following are true:
- Trust is a valid trust under state law
- The trust is irrevocable or became irrevocable upon the owner's death
- The beneficiaries of the trust are identifiable from the trust document
The trustee of the trust provides the IRA custodian or trustee with the documentation required by that custodian or trustee
The IRS has deemed that if a see-through trust is to be divided immediately into separate sub-trusts for the separate interests of multiple beneficiaries, each individual see-through trust may hold directly the beneficiary’s portion of the inherited IRA and allow for separate accounting of that portion for that beneficiary.
If at least one beneficiary is a DB must treat all as DB. If all beneficiaries are EDBs, see EDB options)
Follow the 10-year rule: The full value of the IRA must be distributed by December 31 of the year that includes the 10th anniversary of the IRA owner’s date of death. There are no Required Minimum Distributions (RMDs) during the 10-year period.
The beneficiaries of certain trusts can be treated as having been designated beneficiaries for purposes of determining Required Minimum Distributions after the owner’s death if that trust qualifies as a see-through trust, and all the following are true:
- Trust is a valid trust under state law
- The trust is irrevocable or became irrevocable upon the owner's death
- The beneficiaries of the trust are identifiable from the trust document
The trustee of the trust provides the IRA custodian or trustee with the documentation required by that custodian or trustee
The IRS has deemed that if a see-through trust is to be divided immediately into separate sub-trusts for the separate interests of multiple beneficiaries, each individual see-through trust may hold directly the beneficiary’s portion of the inherited IRA and allow for separate accounting of that portion for that beneficiary.
Step 2: Death of Original IRA Owner
| Successor Beneficiaries | |
|---|---|
| Product, RegEd code and Course Name | |
| A successor beneficiary is someone who inherits the IRA from the original beneficiary after they die. | |
| Original beneficiary election: | Your distribution schedule |
| Life expectancy payments | Continue taking annual Required Minimum Distributions based on the life expectancy of the original beneficiary |
| Successor Beneficiaries | |
|---|---|
| Product, RegEd code and Course Name | |
| A successor beneficiary is someone who inherits the IRA from the original beneficiary after they die. | |
| Original beneficiary election: | Your distribution schedule |
| Life expectancy payments | Continue taking annual Required Minimum Distributions based on the life expectancy of the original beneficiary and the account must be fully distributed by December 31 of the year containing the 10th anniversary of the original beneficiary's death
|
| 10-year rule | Complete the remainder of the 10-year period
|
Considerations
- Lump sum distributions: Beneficiaries have the right to withdraw more than the Required Minimum Distribution up to a full liquidation of their inherited account. This is subject to the terms of their contract and may be subject to product-related surrender charges, fees or limitations.
- Global Atlantic does not require Required Minimum Distributions to be satisfied from inherited IRA contracts held here. If the beneficiary holds multiple inherited IRAs from the same decedent, they may aggregate and choose to take their payment from another account or contract.
- Financial professionals and their clients should consult a qualified tax professional familiar with their unique situation prior to assuming ownership or withdrawing money from a beneficiary IRA.
- Distributions from another Traditional/Roth IRA cannot be substituted for inherited stretch distributions unless the other Traditional/Roth IRA was inherited from the same decedent.
- If the deceased owner did not satisfy their RMD in the year of death, the beneficiary is required to distribute that amount for that tax year.
- If a spouse is under age 59 1/2 when they inherit, they may consider treating themselves as the beneficiary, as a stretch IRA. This way they will retain access to the contract with no concern about a 10% tax penalty.
It is essential for the beneficiary of an IRA to confirm a new designated beneficiary.
"Stretching" an IRA as described in this material is a sales concept where you can use an annuity. The "stretch" strategy assumes the annuity contract has a cash value to support withdrawals. This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. This information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting, or legal advice. As with all matters of a tax or legal nature, you should consult your tax or legal counsel for advice.
*The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was designed to encourage more employers to offer retirement plans and incentivize more employees to participate in them. SECURE Act 2.0, passed in 2022, added more provisions on the same theme. Both bills are attempts to address the retirement savings shortfall that many Americans face as they mature.
This information provided is for financial professional education purposes only. Although it is assumed that the information is accurate at the time of publication, regulations and their interpretation on this topic are subject to change. IRA beneficiaries should consult their tax professional for assistance in their unique situation.
The IRA Beneficiary Tool is designed to educate the financial professional on important considerations for IRA beneficiaries. Please note that not all of our annuity products may be appropriate for each of the beneficiary categories noted above. For further assistance and to explore potential products, please reach out to your wholesaler.
Questions?
If you have questions, or would like more information, please feel free to contact (833) ASK-GA4U or (833) 275-4248.
Use the following links to learn more about some of our products:
ForeAccumulation II
Offers growth potential with no market losses plus an option to guarantee the growth of a death benefit.2
SecureFore
Offers a fixed, guaranteed growth rate with no down-market risk in one of three timeframes: 3, 5 or 7 years.7
ForeStructured Growth II
Our newest RILA offers more than 50 Crediting Strategies, in addition to Buffers and Floors, to provide flexibility based on your clients' appetite for growth and tolerance for risk.
ForeCertain
Gives flexibility for immediate or deferred guaranteed income for life or a set period.
Additional Considerations
1. SECURE Act of 2020 https://www.congress.gov/bill/116th-congress/house-bill/1994/text
2. SECURE 2.0 Act of 2022 https://www.finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pd
3. https://www.govinfo.gov/content/pkg/FR-2024-07-19/pdf/2024-14542.pdf Federal Register, IRS Rules and Regulations 07/19/2024 https://www.govinfo.gov/content/pkg/FR-2024-07-19/pdf/2024-14542.pdf
4. IRS Publication 590b https://www.irs.gov/pub/irs-prior/p590b--2023.pdf