Newly-issued IRS regulations on IRA distributions make having a detailed beneficiary designation crucial. Under these rules, your IRA beneficiary will not be determined until December 31 of the year following the death of the IRA owner. These new rules make it vital that you name a beneficiary and a contingent beneficiary.
Why is this so important? Because the primary beneficiary can disclaim his or her interest up until December 31 of the following year, if that seems to be a good strategy. Then the contingent beneficiary would become the designated beneficiary, able to use a longer life expectancy for required withdrawals.
In addition, a beneficiary that would accelerate withdrawals (such as a charity) can be disposed of in the same time period by having the IRA custodian distribute that beneficiary’s interest. If only individual beneficiaries remain, tax deferral can be extended.
