Court Ordered Contingent Bene
A recent disurbing result in PLR 200742026 seems to be contrary to earlier PLRs regarding a court-ordered beneficiary reformation. Daughter was contingent bene on Dad’s IRA. He transferred to a new IRA and Daughter was left off. Mom was primary, and died. Before Dad could get new bene change papers signed, he died. Court ordered IRA benefits to be paid to Daughter. IRS said she is stuck with using Dad’s remaining LE for RMD purposes. I think people forget that it is quite common for many older couples to die within 6 months of each other, especially when the wife goes first and the husband can’t find the stove or washing machine buttons!
Permalink Submitted by Bruce Steiner on Thu, 2007-12-20 20:39
The IRS is not bound by state court decisions unless they are from the highest court in the state. In this case, since there probably wasn’t any real contest in the state court, the IRS may have chosen not to respect the state court decision .
In the prior rulings (PLRs 200616039 through 200616041), there was an inference that the bank holding the IRAs made an error. That was not the case in the new ruling (PLR 200742026). That may have been an important factor in PLR 200742026. Another factor may have been the amount of time that had elapsed since the IRA owner’s death
Bruce Steiner, attorney
NYC
also admitted in NJ and FL
Permalink Submitted by Denise Appleby on Sun, 2007-12-23 20:08
Another case for using IRAs with beneficiary-friendly (default beneficiary) provisions…If the default beneficiary provision had been [i]spouse[/i], then [i]children[/i], she would have been able to use her life expectancy.
It would seem that the IRS had no choice but to apply the regs for purposes of determining the life-expectancy that applied post-death…even if the beneficiary of the estate is permitted to moved the assets to an inherited IRA under his/her TIN him/her, except in the cases Bruce noted. There are a few PLRs with similar rulings-I think 200343030 is one