IRA Disclaimer
If husband dies after RMDs started and wife is 100% beneficiary and no contingent beneficiaries are listed, if wife disclaims and the IRA goes to husband’s estate (no formal trust set up, only a will), will the IRA pass to the couple’s 2 children without having to go through the time and expenses of probate? If it does pass to the kids, are the RMDs based on the 5yr rule or are they based on the remaining life expectancy of the deceased husband?
Permalink Submitted by Bruce Steiner on Tue, 2008-07-22 23:34
You probate the Will, not the assets. Probating a Will is generally not particularly expensive or burdensome. But absent a contingent beneficiary, the IRA becomes an estate asset, and even if the decedent was over 70 1/2, the stretchout is limited to the decedent’s life expectancy (as if he had not died). The tradeoff is between the estate tax benefit of getting the IRA to the children versus the income tax benefits of rollover, potential Roth conversion, and longer stretchout. If this is the same situation on which you recently posted, you may wish to consult with competent tax/estates counsel, who can give you more specific advice based upon the particular facts and your objectives.
Permalink Submitted by Al Fry on Wed, 2008-07-23 02:57
Bruce I have a similar case, except spouse had predeceased, and no beneficiary was named on surviving spouse’s rollover IRA (someone was asleep at the switch!). Advisor was asking how to title inherited IRA. I suggested (absent a default bene other than estate) “Estate of Jane Doe as beneficiary of Jane Doe”. If we can get court to agree to allow assignment the inherited IRAs to the benes, they would be retilted “Drew Doe as bene of Jane Doe; and Alli Doe as bene of Jane Doe”, respectively. Of course they would use Jane’s LE for RMDs (she was 81). Is this the correct procedure, or what did I miss?
Permalink Submitted by Bruce Steiner on Wed, 2008-07-23 13:04
Absent some special circumstance (which you did not discuss in your post), or some unusual procedural requirement in a particular state (I’m not familiar with the procedural requirements in all 50 states), the executor shouldn’t need court approval to distribute the IRA (or any other assets) to the beneficiary.
Permalink Submitted by Alan Spross on Wed, 2008-07-23 20:50
And the registration wording appears appropriate, although the reverse order would also be acceptable, even though the IRS apparently prefers the beneficiary to be shown first.
For example, the reverse would be “Jane Doe, deceased, FBO Estate of Jane Doe”.
Permalink Submitted by Denise Appleby on Wed, 2008-07-23 21:16
True.
The custodian’s operational requirements or limitations usually drive registration. For instance, one custodian requires that the account be registered as follows.
IRA FBO Estate of Jane Doe
B/O Jane Doe
Or IRA FBO John Doe
Beneficiary of Jane Doe
This is because their system defaults to reading the first line when issuing checks from the account.
The IRS approved the set up, with an explanation that as long as it is clear which of the two is the decedent it is sufficient for their purposes.