Beneficiaries naming beneficiaries.

[Guest Kathleen Fouquet]

It seems to be fairly common for a non-spouse beneficiary who has inherited an IRA to name his or her own beneficiary. I seem to recall that this was a gray area some time ago. Can anyone point me to a reg., notice or something that puts it in black and white?

[BPickerCPA]

This is really a NON-tax issue. The IRS has said it's OK. But it really is up to each custodian as to whether they will permit it. The beneficiary's beneficiary has to continue distributions on the same schedule as the original beneficiary (hence it being a non-issue for the IRS).

Check to see if your custodian will permit it.

[mbozek]

It is more properly a matter of state law --whether a property interest can be assigned by the owner. In most IRAs the beneficiary becomes the IRA owner upon the death of the IRA owner and is entitled to all of the rights of ownership, including the right to designate a beneficiary. Need to review the provisions of IRA custodial agreement to determine the extent of rights. This rule does not apply to payments under an annuity contract which is subject to the payment option selected by the IRA owner. Finally payment under a trust which is the beneficary of an IRA will be made under the terms of the trust.