If you have multiple beneficiaries for your individual retirement account (IRA), you can allocate a portion of the IRA to each beneficiary, or you can split the IRA and create separate accounts for each beneficiary. Another alternative is to instruct your beneficiaries to separate the accounts by December 31 of the year following your death. The advantages of splitting an IRA include:
- Beneficiaries don't have to make joint decisions. They can each invest their account as they prefer.
- The beneficiaries can each designate a custodian that he/she is comfortable with.
- Each beneficiary can name his/her own beneficiaries.
- Each beneficiary can take distributions based on his/her age.
If an IRA is not split, the required minimum distribution on traditional IRAs is calculated based on the oldest beneficiary's age. That means that younger beneficiaries will be forced to take larger distributions than would be required if they held the account individually.