Establishing beneficiary post death
Bob, 67, died with 3 IRA accounts at different institutions, all but one have his surviving spouse listed as the beneficiary.
The one account not designated to his spouse has no beneficiary on record. Is there a way to keep this IRA from passing into his estate, given that his spouse survived him?
Thanks.
Permalink Submitted by Alan Spross on Tue, 2008-02-19 18:50
Only if the IRA agreement contains a default designation of his spouse as beneficiary if he has not designated a beneficiary himself. Therefore, the first thing to do is to carefully examine the IRA agreement.
If it turns out the estate is the default beneficiary, then any will applies. There have been prior IRS letter rulings allowing a sole spousal estate beneficiary if the spouse is also executor to have the IRA assigned to the spouse, who could then assume it or roll it over. If the spouse is determined the estate beneficiary under intestate provisions, those rulings may be less clear, and the 5 year rule would apply.
If Bruce Steiner sees this post, he may comment as he has researched this situation and written articles on these rulings.
Permalink Submitted by Bruce Steiner on Tue, 2008-02-19 23:10
It is sometimes possible to get the IRA to the spouse so he/she can roll it over where it is payable to the estate. We obtained a private letter ruling allowing this.
Here is the article I wrote in the October 1997 issue of Estate Planning on spousal rollovers where the spouse is not the named beneficiary. It is still reasonably current. http://www.kkwc.com/docs/AR20050125164755.pdf
Permalink Submitted by todd sims on Sat, 2008-06-07 06:56
Mr. Steiner,
It seems from your paper the criteria centers on that fact that the spouse receives the assets without the discretion of anyone else e.g trustee or executor. What about in a case where the IRA was to the estate, but the IRA was assigned to the spouse by court order (as part of a settlement)? Seems to me that would qualify as no discretion.
The estate was recently settled and the spouse had the accounts retitled as beneficiary. No distributions have been made. Can the accounts be retitled back to her as owner? Or can she elect to take distributions over her lifetime? Does she need to pursue a Letter Ruling?
Permalink Submitted by Bruce Steiner on Sun, 2008-06-08 01:19
The IRS is more liberal on spousal rollovers today than when I wrote my article in 1997. See, for example, PLR 200807025.
From the facts presented, it seems that there should be a good chance she could obtain a favorable ruling. She should consult with counsel who can give her specific advice based upon the particular facts and her objectives.
Bruce Steiner, attorney
NYC
also admitted in NJ and FL
Permalink Submitted by todd sims on Sun, 2008-06-08 05:39
Thank you for your response. I found PLR 200127027 which has some very similar circumstances and is encouraging.
The scary part is the surviving spouse had several attorneys on the payroll on this case. They seemed to have overlooked this point (and another important one that I caught). Not confidence inspiring.
Permalink Submitted by Bruce Steiner on Sun, 2008-06-08 23:02
PLR 200127027 is also helpful.
Clients often ask “shouldn’t my lawyer have known that?” Often the answer to that question is “not necessarily.” In this case, it’s not necessarily unreasonable that the spouse’s lawyers were not familiar with this, especially if their focus was the Will contest rather than the estate administration.
As is often the case, the spouse’s focus should be on what to do next. I think she should consult with tax/estates counsel who is familiar with this issue, who can advise her on whether it makes sense to apply for a private letter ruling, and who can pursue the ruling efficiently if she decided to apply for one.