These heirs are apparent
We are not likely to exhaust our retirement accounts, so we have named our children as successor beneficiaries to our IRAs and 401(k)s.
I always had assumed that our kids would have to withdraw amounts from these plans based on their own life expectancies, but we recently were told that IRS rules would force them to look for the oldest person who could possibly be an heir (whether or not that person was actually an heir), and use that person's life expectancy to determine the Required Minimum Distribution.
If this is so, how can we protect our children?
Sometimes IRS rules are confusing or obscure, but not in this case. Your heirs will have their respective amounts in separate IRAs with a title including your name. For example: John Smith, deceased July 1, 2013, FBO (for benefit of) Mary Smith, beneficiary. They each will be required to withdraw based on their own life expectancies. IRS has a table for this.
In each succeeding year, they will reduce the original life expectancies by one to get the Required Minimum Distribution. Keep in mind that the beneficiary designated in your pension plan will supersede one named in your will.
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