Careful naming of IRA beneficiaries is critical. Merely putting a name on the beneficiary form is insufficient; a certain amount of thought, communication, and coordination is required to prevent loss of family wealth to taxation.

An IRA owner who wishes to pass on as much wealth as possible should carefully consider who should be named as a beneficiary. Wealth grows more quickly in the tax-free or tax-deferred environment inside an IRA. If some of your beneficiaries do not need the IRA funds for support, you should name the youngest possible designated beneficiaries to spread distributions over the longest possible time period. This minimizes RMDs, leaves more money to grow inside the IRA at its pre-tax rate of return and maximizes the amounts that can be passed on to heirs.

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