If one beneficiary dies before the IRA owner, we believe that beneficiary’s share would be divided equally among the other surviving primary beneficiaries. If the owner wants the estate of a deceased child to inherit that child’s portion of the IRA, then the owner should consult with an attorney regarding the proper way to amend her IRA beneficiary designation form. She may need to include new language that distributes her IRA to each child “per stirpes,” which is a legal term that means “by branch.”  This designation would distribute a deceased child’s share to their estate in equal amounts.

Alternatively, the owner may wish to divide her IRA into separate accounts for each beneficiary, which is permitted under the IRS rules. Again, the owner should consult with an attorney or tax professional to determine the best way to distribute her IRA according to her wishes.

For resources related to our guidance, please see:

• IRS Publication 590-B  — Distributions from Individual Retirement Arrangements (IRAs) (2015) (“A single IRA can be split into separate accounts or shares for each beneficiary. These separate accounts or shares can be established at any time, either before or after the owner's required beginning date.”)