Can You Transfer an IRA to Another Person? Law and Exceptions

You cannot transfer an IRA to another person as a gift or reassignment while you are alive. Federal law defines an IRA as an account held for the exclusive benefit of one individual, and that definition is the wall.¹ The account cannot be retitled into someone else’s name, split off to a child, or handed to a sibling in a lower tax bracket. Money leaves your IRA and reaches another person through only three legitimate routes: a divorce settlement, a beneficiary designation that takes effect when you die, or a direct distribution to a qualifying charity.

Why the Law Blocks Living Transfers

The tax code says an IRA must be a trust “created or organized in the United States for the exclusive benefit of an individual or his beneficiaries.”¹ The tax deferral, the contribution limits, the early-withdrawal rules — all of it attaches to you personally. If you could reassign the account to a family member at will, the whole framework of retirement incentives would fall apart. So the law simply doesn’t allow it. There is no form to fill out, no fee to pay, no version of “gifting” the account that works.

What Happens If You Try

Attempting to hand off an IRA doesn’t just fail administratively. It destroys the account’s tax status. If you engage in a prohibited transaction with your IRA, the account loses its tax-advantaged status as of the first day of that tax year, and the IRS treats the full fair market value of everything inside it as distributed to you on that date.² That means ordinary income tax on the entire balance in a single year, which can push you into brackets you’d never normally see.

If you’re under 59½, add a 10% early withdrawal penalty on top of the income tax.³ On a $200,000 IRA, that penalty by itself is $20,000 before the income tax calculation even starts.

The same deemed-distribution rule applies if you pledge your IRA as collateral for a loan to help someone else. The portion you pledge is treated as distributed to you immediately.⁴ People sometimes reach for this thinking it’s not really a withdrawal. The tax code disagrees.

The Divorce Exception

Divorce is the only scenario in which IRA assets can legally move to another living person tax-free. Section 408(d)(6) of the tax code says a transfer of your IRA interest to a spouse or former spouse under a divorce or separation instrument is not a taxable event. After the transfer, the account is treated as though it always belonged to the receiving spouse.⁵

The transfer must be spelled out in a divorce decree, a separate maintenance decree, or a written separation agreement. Unlike a 401(k), a standard IRA does not require a Qualified Domestic Relations Order. The decree language itself is usually enough for the custodian to process a trustee-to-trustee transfer or re-register the account. The receiving spouse then has a normal IRA in their own name, with the same tax deferral, contribution rights, and beneficiary options.

Where this goes wrong is when couples handle it informally. If you withdraw money from your IRA and hand it to your ex, the IRS treats that as a regular distribution to you — taxable, and possibly penalized. The transfer has to move between custodians under the terms of the court order.

How the Money Reaches Someone Else After You Die

Death is the ordinary path for IRA assets to reach another person. IRAs do not pass through a will or through probate. They pass through the beneficiary designation form on file with the custodian, and that form functions as a contract. It overrides your will. If your will leaves everything to your children but your IRA form still names an ex-spouse from twenty years ago, the ex-spouse gets the IRA. Courts have upheld this result repeatedly.

When you die, the custodian freezes the account, verifies the death, and moves the assets into a separate inherited IRA for each named beneficiary. What the beneficiary has to do next depends on who they are and how old you were when you died.

One obligation that often gets missed: if you died during a year in which you owed a required minimum distribution but hadn’t taken it, the beneficiary must withdraw that amount by year-end.⁶ Missing that year-of-death distribution triggers a penalty.

If the Beneficiary Is Your Spouse

A surviving spouse has the most flexibility of any beneficiary. Your spouse can treat the inherited IRA as their own by re-registering it, roll it into their existing IRA, or stay as a beneficiary on the inherited account.⁷ Treating it as their own lets them delay required minimum distributions until they reach 73, keep contributing, and name their own beneficiaries. Staying as a beneficiary can be smarter if the spouse is under 59½ and needs the money, because distributions from an inherited IRA aren’t hit with the 10% early withdrawal penalty regardless of age.

If the Beneficiary Is Anyone Else

The SECURE Act of 2019 ended the “stretch IRA” for most non-spouse beneficiaries who inherit from an owner who died in 2020 or later. The account must be fully emptied by the end of the tenth calendar year after the owner’s death.⁶ Whether annual withdrawals are required during those ten years depends on the owner’s age at death:

If the owner died at or after age 73, the beneficiary must take annual required minimum distributions in years one through nine and empty the account by the end of year ten.
If the owner died before age 73, no annual distributions are required. The beneficiary can wait and take everything in year ten, though spreading withdrawals usually results in less total tax.

A short list of non-spouse beneficiaries can still stretch distributions over their own life expectancy:

Disabled or chronically ill individuals
Beneficiaries no more than ten years younger than the deceased owner
Minor children of the account owner, but only until they turn 21, at which point the 10-year clock starts

Inherited Roth IRAs follow the same 10-year depletion schedule, but withdrawals are generally income-tax-free as long as the Roth has been open for at least five years.⁶

If the Beneficiary Is a Trust

Some owners name a trust as their IRA beneficiary to keep control over distributions after death — useful when heirs are minors, have special needs, or have money-management concerns. A trust can qualify as a “see-through” beneficiary and take on the distribution timeline of the individuals underneath it, but only if it meets specific IRS requirements. Older conduit trusts drafted under the pre-SECURE stretch rules can now backfire, forcing the entire balance out in year ten as a lump sum. Anyone considering a trust as an IRA beneficiary should work with an estate planning attorney familiar with the post-SECURE landscape.

The Charitable Route

You can send money directly from your IRA to a qualifying charity without owing income tax on the distribution. These qualified charitable distributions are available once you reach age 70½, and for 2026 you can distribute up to $111,000 tax-free per year.⁸ QCDs count toward your required minimum distribution once you hit 73, which is why many retirees use them.

The money must move directly from the custodian to the charity. If the custodian writes the check to you and you donate it yourself, the tax-free treatment is lost. Only traditional IRA distributions qualify, and the recipient must be a public charity under Section 170(b)(1)(A) of the tax code.⁹ Donor-advised funds and private foundations don’t count. And a QCD is a donation, not a transfer to a person, so this route doesn’t help anyone hoping to route retirement money to a family member.

Keep Your Beneficiary Form Current

Because death is the main path for an IRA to reach another person, the beneficiary designation on file with your custodian is the single most important estate document for that account. The form asks for each beneficiary’s full legal name, date of birth, Social Security number, and mailing address, along with whether each is primary or contingent and the percentage each receives. Most custodians accept updates through their online portal; some still require a notarized paper form.

Review the form after any major life event: marriage, divorce, the birth of a child, or the death of a named beneficiary. An outdated designation can send the account to someone you haven’t spoken to in decades, and your will cannot fix it. If you name no beneficiary at all, the account usually defaults to your estate, which forces it through probate and strips heirs of favorable distribution timelines.⁶

1
Office of the Law Revision Counsel. 26 USC 408 Individual Retirement Accounts
2
Office of the Law Revision Counsel. 26 USC 408 Individual Retirement Accounts – Section (e)(2)
3
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
4
Office of the Law Revision Counsel. 26 USC 408 Individual Retirement Accounts – Section (e)(4)
5
Office of the Law Revision Counsel. 26 USC 408 Individual Retirement Accounts – Section (d)(6)
6
Internal Revenue Service. Retirement Topics – Beneficiary
7
Internal Revenue Service. Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) – Section: Inherited From Spouse
8
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Cost-of-Living
9
Office of the Law Revision Counsel. 26 USC 408 Individual Retirement Accounts – Section (d)(8)