If you want to leave some or all of your IRA to someone who is now a minor, you can use a trust. However, that can be expensive. Another alternative is to get the financial firm that is holding your IRA to consent to the use of a custodial account as beneficiary in case you die while an intended heir is still a minor.
* Without such consent, a “guardian of the property” might have to be appointed for the minor beneficiary. The court appointing the guardian would want control over how the inherited IRA would be invested and distributed while the guardian might have to post a surety bond, to.
* With this consent, you can specify the custodial account and the name of the custodian on the IRA beneficiary form. The inherited IRA will be held in the custodial account and the custodian you have named will be responsible for handling IRA distributions. Money coming out of the IRA can be held in the custodial account, transferred to another custodial account, or spent on the minor’s behalf.
Eventually, control of the inherited IRA will pass to the youngster after he or she comes of age. That might be at an age from 18 to 21, depending on state law.