Designating Your Beneficiaries

• To designate IRA beneficiaries, you must file paperwork directly with your account trustee rather than name inheritors in your will. Doing so means the IRA won't go through probate and any legal wrangling involved in settling your estate. The assets will be in the direct possession of your beneficiaries.
  
  

Spousal Beneficiary Features

• If you name your spouse as your sole beneficiary, she may put the account in her name and treat it as her own, continue to make contributions and let the money grow, tax-deferred, until she is ready or required to take distributions.
  
  

Non-Spousal Beneficiary Features

• All non-spouse beneficiaries, and spouses who are named among an account's multiple beneficiaries, can let the account sit for up to five years before withdrawing it entirely. Or they can begin taking a portion of the IRA each year, beginning the year after your death. The latter option is sometimes called a "stretch" IRA, because it extends the tax shelter for the maximum possible time.
  
  

Warning

• If you do not designate a beneficiary with your trustee, your IRA automatically passes to your estate, where it will be subject to probate. Also, Internal Revenue Service rules require inheritors to empty the account within five years, so a stretch IRA is not an option.