The Wills, Trusts & Estates Prof Blog discusses some of the options that heirs have when inheriting retirement accounts in "What Your Kids Can Do When They Inherit Your Retirement Accounts."
Most people designate their spouses as the beneficiaries of their retirement accounts. However, people sometimes name non-spouse beneficiaries, such as their children.
What children can do with retirement accounts is not as simple as it is for spouses. However, there are a few options, which include:
- The assets in the account can be taken out immediately as one lump sum.
- The assets in the account can be taken out whenever needed, as long as the account is empty within five years.
- The children can choose to stretch the account out over their own expected lifetimes. They will need to make annual required minimum distributions and must take the first one by a set time.
An experienced estate planning attorney with knowledge of the post-death required minimum distribution rules can advise you and your beneficiaries regarding options with respect to retirement accounts.
Reference: Wills, Trusts & Estates Prof Blog (Nov. 22, 2017) "What Your Kids Can Do When They Inherit Your Retirement Accounts."