IRA Types & Beneficiaries
I am an older gent needing some general information about different types of IRAs and beneficiary information about them. First some background information so you will understand from where I am coming.
Our 39-year old son passed away two weeks ago leaving his widow and no children. I am getting ready to visit her and review his files and records. He had a will, but it was executed prior to his marriage four years ago and was never changed. He named his sister as beneficiary of his assets.
However, after the marriage he purchased real estate jointly with his wife, he established bank accounts jointly with his wife, and he had a home-building business of which he was sole proprietor and his wife was not part of the business.
Our daughter-in-law (DIL) has initially sought the advice of legal counsel and I hope to meet with counsel shortly (all of this is in another state [NC]). From my initial investigation the real estate, which is land only, is jointly owned. The bank accounts are in joint ownership. The home-building company remained in his name only. Unfortunately he did not have life insurance coverage and did have some IRAs.
Initial information my DIL has received from counsel is that in accordance with NC laws the real estate goes to her, any joint bank accounts go to her. It is the IRAs that I am a bit hung up on right now before talking to counsel. My daughter appears to have been named as primary beneficiary on all the IRAs, but counsel is saying that the SEP IRA (don’t know what that is and how it differs from a traditional IRA) goes to the widow and the traditional IRAs go to my daughter. It is my understanding that any life insurance and IRAs pass outside the will as they have their own beneficiary designated. The SEP and traditional IRAs were started and funded prior to his marriage.
Counsel has also indicated that the business assets, when closed out and business equipment is sold, will eventually end up going to my daughter with possibly a share going to our DIL.
Can anyone offer suggestions as to what I should consider when talking with counsel later this week? Federal estate tax is not of a concern here based on the total value of his estate.
Permalink Submitted by mk foss on Tue, 2009-01-13 19:37
State laws have some protections for surviving spouses – items that the attorney says will go to the DIL that were not held jointly are probably due to those laws.
The SEP is a form of IRA funded with business profits. It is treated as a traditional IRA for almost all tax purposes.
The custodian of the traditional IRA may have information as to who would inherit if your daughter were to disclaim. Many custodial agreements provide that if the beneficiary disclaims or predeceases that the surviving spouse (if any) becomes the beneficiary. Other agreements provide that the IRA goes to the estate in such a case.
You may want to ask the attorney what would happen if the estate becomes the beneficiary.
I’m sorry to hear of your loss – he was way too young.