If you have multiple beneficiaries for your IRA account, you can spare them from imminent hassle by establishing a separate account for each beneficiary. Many multiple IRA beneficiaries elect to use the life expectancy option, in which case distributions are allotted according to the life expectancy of the oldest beneficiary. Take the case of Ralph, age 63, Ellen, 45, and Richard, 25. Without separate accounting, all must accept the same total distribution of the oldest of the three, Ralph, whose yearly distribution amounts to $20,000. This means that Ellen and Richard will be subject to higher income tax than would be the case if their individual life expectancies were the deciding factor. With separate accounts, Ellen and Richard would have this option and pay less tax. This would give them more flexibility in financial planning and much longer periods to enjoy their IRA distributions.
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