Changing beneficiary after IRA owner’s death
Client inherited Bank IRA CD from his father; mother is also deceased. There are four total siblings and the sole beneficiary wants to redistribute the inherited IRA among siblings equally. Father passed 6 mos ago without a will or trust. Options?
Permalink Submitted by Alan Spross on Fri, 2008-02-15 20:40
Check the IRA agreement carefully to see who is the default beneficiary should the sole beneficiary partially disclaim. It would be most convenient if the other children were default beneficiaries, but this is probably not the case.
More than likely the father’s estate is the default beneficiary and the disclaimed funds would be subject to state intestacy laws and probate as well, but if the state laws indicate the children as heirs, this would also accomplish transfer of the funds to the desired parties. This decision should not be made until the situation is totally clear and may require legal assistance to be sure the desired result takes place. This strategy might be used if the amount in the IRA warrants.
Finally, the remaining solution would be to have the named beneficiary take distributions and pass them to the others net of income tax adjustments and under the 12,000 gift exclusion. This approach would only be best if the amount in the account was modest. It would be more costly if the sole beneficiary is in a higher bracket than the others, but would eliminate probate and disclaimer costs.
Therefore, a thorough analysis should be done to arrive at the best solution starting with an examination of the IRA agreement.