- Be valid under state law
- Be irrevocable, or irrevocable upon the IRA owner’s death
- Have identifiable individuals as beneficiaries
- Have trust documentation filed no later than Oct. 31 of the year following the year of the IRA owner’s death
After an account owner dies, the IRA enters a “GAP period” stretching from the date of death to Sept. 30 of the year following the account owner’s death. The GAP period allows beneficiaries and advisors a period to plan the inheritance process by using disclaimers, distributions and account splitting.
If an inherited IRA is split among multiple designated beneficiaries during this GAP period, each beneficiary can still use the stretch IRA strategy using their own life expectancy. However, if the account is split after the GAP period, all beneficiaries may end up bound to use the shortest life expectancy among them to calculate their RMDs.
Ed Slott & Co. offers a short checklist of instructions after the death of an IRA owner:
- Touch nothing until a plan is in place.
- Make sure the inherited account is properly titled.
- Split the IRA if there are multiple beneficiaries.
- Calculate required distributions.
- Make sure new beneficiaries are named and beneficiary forms are filled out.
- Manage any IRA-related trusts
- Change investments on inherited IRAs
- Trustee-to-trustee transfer for non-spousal beneficiaries.