Designated beneficiaries supersede a will?
Hello. My father, a New York resident had an IRA at a brokerage firm. The IRA had 5 designated beneficiaries. One of the 5 beneficiaries died after my father, but before the IRA was divided. The recently-deceased beneficiary had filed a form with the brokerage naming the other 4 original beneficiaries as his designated beneficiaries. The legal department at the brokerage stated that the IRA cannot simply be distributed to the remaining 4 beneficiaries. They said that the IRA must first pass to the estate of the recently -deceased person. To further cloud the issue, the recently-deceased person lived in Georgia and apparently had no will.
My belief is that the designated beneficiary form filed by the recently-deceased obviates the need to have the share of the IRA pass through his estate. I further believe that the presence or absence of a will and residence in Georgia are irrelevant because a designated beneficiary form supersedes a will anyway. Therefore, I believe that the brokerage firm should simply distribute the share of the recently-deceased to his beneficiaries. Is the brokerage house correct, or am I?
Thank you.
R.E.
Permalink Submitted by Alan Spross on Fri, 2008-03-14 04:16
The key here may well be whether the custodian accepted the successor beneficiary designation from the deceased beneficiary. Regardless, you should examine your IRA agreement and any amendments which may have been forwarded with a later edition date.
With these two key elements defined, you will be in a position to determine whether the explanation given is correct or not. If you still think the firm is in violation of their own agreement, I would present them with the prospect of legal action.
Meanwhile I would be sure that you and the others are careful to protect your interests and create your separate accounts with successor beneficiaries. You may also wish to have these accounts directly transferred to another custodian, but be careful because the funds cannot be rolled over and must move only by transfer.
I note by checking Vanguard’s agreement for example, it states that “if a beneficiary dies after the investor but prior to receipt of the entire interest and has successor beneficiaries, the successor beneficiaries shall succeed to the rights of the beneficiary.” I would expect that treatment to be more or less typical, but you need to get the applicable agreement.
Permalink Submitted by richard elgart on Tue, 2008-03-18 23:52
Thank you for your help.
relgart