Non Entity Beneficiary IRA
We received a question from a prospective client regarding her father’s Janus IRA. His spouse was the beneficiary, predeceased her husband and since no contingent bene’s were ever named and no bene updates were requested, this IRA goes to the estate. There are two surviving adult children that the father’s Will leaves everything to equally.
Janus is advising us that in order to avoid taking lump sums, the two siblings must establish ENTITY Bene IRA’s vs INDIVIDUAL Bene IRA’s. This means that the estate will need to remain open until the funds are distributed over the next 5 years. Neither sibling wants to take a lump sum as they are very high tax brackets.
There are no other assets remaining in the estate and the siblings would prefer to open INDIVIDUAL Bene IRA’s so the estate can be closed. Can anyone confirm that we are being given the correct instructions from Janus?
Any input on this matter would be greatly appreciated.
Thanks!
Permalink Submitted by Alan Spross on Thu, 2008-05-22 20:15
Kevin.
I am attaching a link to Natalie Choate’s dissertation on this subject. While it may be dated somewhat, if Janus insists on forcing the estate to remain open, a direct transfer to an accepting IRA custodian should allow the estate to close and the IRA then assigned to the estate beneficiaries. Perhaps Janus only wants the estate entity set up as beneficiary until such time as it actually does close. Have they actually said that they will not allow the estate to terminate?
Since the estate was the actual beneficiary, if her father passed prior to his RBD, the 5 year rule applies and even if he passed later, only his own non recalculated life expectancy can be used by each estate beneficiary or the estate itself if it remains open. Therefore, the stretch has already been severely compromised by having no designated beneficiaries.
http://www.ataxplan.com/bulletinBoard/ira_providers.cfm