contigent beneficiaries on IRA
An IRA holder designates a primary beneficiary (his wife) and two contingent beneficiaries (his children). He passes away and the wife-primary beneficiary accepts the IRA. Do the two designated contingent beneficiaries now automatically become primary beneficiaries with the wife as the new holder of the IRA??? ❓
Permalink Submitted by mk foss on Tue, 2009-09-29 19:10
No. Once the primary beneficiary takes the IRA – the contingent beneficiaries are no longer relevant. Therefore, it’s important that the new beneficiary, roll it over and name the children as primary beneficiaries or if she’s taking it as a beneficiary, notify the custodian that the children are her beneficiaries.
Permalink Submitted by john stoddard on Tue, 2009-09-29 20:59
[quote=”[email protected]“]No. Once the primary beneficiary takes the IRA – the contingent beneficiaries are no longer relevant. Therefore, it’s important that the new beneficiary, roll it over and name the children as primary beneficiaries or if she’s taking it as a beneficiary, notify the custodian that the children are her beneficiaries.[/quote]
[b]Appreciate the reply. I guess it is correct to assume that the new IRA benefactor (wife) can name my children as her new beneficiaries or for that matter anyone else she likes.
I would like to leave my wife the lion’s share of IRA with the quarantee that she place as primary beneficiaries my four children listed initially as contingent beneficiaries.
Wife has agreed and signed a document stating that upon my death and receiving my IRA that she will designate my 4-children as her primary IRA-beneficiaries and will not change the assignment during her life.
If this document is attached to my will, is this sufficient to quarantee that my children will remain befeficiaries to this-IRA after my death?[/b]
Permalink Submitted by Janine Janine on Tue, 2009-09-29 21:13
Interesting question! I look forward to reading the reply.
Permalink Submitted by mk foss on Tue, 2009-09-29 21:28
Normally a will has no relevance when it comes to IRA beneficiaries because the IRA is not part of the estate that is settled by the will.
Your other choices would be to name your wife and the four children as beneficiaries now – maybe 80% to her and 5% to each of them. You would still hope that she would name the children as beneficiaries of her rollover IRA but you’d know that some benefits would go to the children in the event something horrible happens, like your spouse passing away so soon after you that she doesn’t have time to name new beneficiaries.
If there were 5 beneficiaries as mentioned, they would have until December 31 of the year after your death to split the IRA into inherited accounts for each beneficiary. At that point, your spouse could roll over her portion. All beneficiaries would use their own life expectancies.
Permalink Submitted by john stoddard on Wed, 2009-09-30 00:49
[b]I do not think it smart to leave children (25-40 yrs old) any large sum of money because it generally goes into the toilet. Seriously, it is wiser to leave their step-mother the lion’s share of IRA for her living expenses as she ages, but it looks like trying to [u]quarantee[/u] my step-children be signed-in as her dependents is wasted motion. Correct? Thanks for the valuable information[/b]
Permalink Submitted by Bruce Steiner on Wed, 2009-09-30 01:42
I’m not sure how attaching it to the Will has any relevance. But johnws may wish to discuss with his lawyer whether the agreement might be valid as a postnuptial agreement, or how best to minimize the likelihood of a successful challenge to it as a postnuptial agreement.
Permalink Submitted by john stoddard on Wed, 2009-09-30 04:17
Good point, I will look to solve the problem thru use of a postnuptial agreement.
Permalink Submitted by john stoddard on Wed, 2009-09-30 04:24
[quote=”[email protected]“]Normally a will has no relevance when it comes to IRA beneficiaries because the IRA is not part of the estate that is settled by the will.
Your other choices would be to name your wife and the four children as beneficiaries now – maybe 80% to her and 5% to each of them. You would still hope that she would name the children as beneficiaries of her rollover IRA but you’d know that some benefits would go to the children in the event something horrible happens, like your spouse passing away so soon after you that she doesn’t have time to name new beneficiaries.
If there were 5 beneficiaries as mentioned, they would have until December 31 of the year after your death to split the IRA into inherited accounts for each beneficiary. At that point, your spouse could roll over her portion. [b][color=#800000]All beneficiaries would use their own life expectancies.[/quote][/b][/color]
[b]One question on your statement in red…..it is my understanding that if children inherit the same IRA with an older person also as beneficiary, all withdrawals then are based on the oldest person’s life’s expendency making it a real disadvantage for younger children interested in preserving the IRA as long as possible. Am I wrong on this??[/b] ❓
Permalink Submitted by mk foss on Wed, 2009-09-30 20:38
As long as the IRA is split by December 31 of the year after the owner’s death, each individual named as a beneficiary can use their own life expectancy. If a trust is named, even if it is split into separate trusts for each beneficiary soon after death, then the life expectancy of the oldest beneficiary is used.