One of the quagmires of the U.S. tax code is the beneficiary rules for individual retirement accounts (IRAs). Recently, the Internal Revenue Service (IRS) issued several private letter rulings that could mean larger payouts to multiple beneficiaries of an IRA.

First, a little background. When an IRA owners dies, the funds in the account must be paid out to the beneficiaries within a prescribed period of time. Spouses of IRA owners have the easiest options. They can roll the IRA into their own IRA and make withdrawals based on their life expectancy or the combined life expectancy of themselves and a new beneficiary. They also can leave the account in the deceased’s name and start withdrawals from the account based on the decedent’s age. The exact required beginning dates for distributions and the amounts depend on the option selected, whether the owner died before or after the owner started taking distributions from the IRA, and other factors too numerous to mention here.

Choices are more restrictive for nonspouse beneficiaries, such as children, especially if there are multiple beneficiaries. Generally, if the IRA owner has already started taking required minimum distributions (typically by April 1 of the year following the year the owner turned 70 ), the beneficiaries will receive the payouts at the same rate the owner would have received them had the owner lived. If the payouts were being recalculated every year, which results in lower required payouts, the recalculations would continue but would now be based on the age of the oldest beneficiary.

Presuming the beneficiary is younger than the owner, this too results in lower payouts.

The scenario changes somewhat if the owner dies before he or she would have started the required distributions. Now the beneficiaries have two choices. They can empty the entire account by the end of the fifth year following the year of the owner’s death. This could mean a hefty income tax bill.

The preferred choice for many beneficiaries is to try to stretch out the payments. This allows the money left in the IRA to continue to grow tax-deferred. Until recently, the minimum distributions were based on the life expectancy of the oldest beneficiary, regardless of the age of the other beneficiaries. With an IRA whose beneficiaries are ages 50,40 and 30, this won’t make any difference to the 50-year-old, but the younger beneficiaries would not be able to stretch the payments out for their longer life expectancies.

The IRS has issued several private letter rulings that change these distribution requirements. Technically, private letter rulings apply only to the specific taxpayers involved, but generally they indicate the thinking of the IRS, so other taxpayers can follow suit. The IRS now allows the beneficiaries to divide the IRA account into multiple IRA accounts, with a single beneficiary named to each account. The distributions are then based on the life expectancy of that sole beneficiary, not the age of the oldest of the beneficiaries of the original account. Thus, in the case above, the 30-year-old could take his or her third of the original IRA, move it into a new IRA and start withdrawals based on his or her own life expectancy.

Requirements must be carefully followed to make this work, so you,ll want to talk to a retirement planning expert to make sure it’s done right. For example, the divided accounts must remain in the name of the deceased IRA owner. Second, the election to do this must be made no later than the last day of the year following the year of the owner’s death, and the beneficiary must make the first distribution by that date.

The big catch to the rulings is that this strategy is not available if the owner started minimum distributions before his or her death, and experts doubt the IRS will change that rule. The problem can be overcome, however, if IRA owners simply split their account into multiple IRAs while they are still alive and before they begin minimum distributions. The owner would name a separate beneficiary for each IRA, so when the beneficiary inherits the IRA they could base distributions on their own life expectancy.