RMD in year of Primary Beneficiaries Death
Facts
George – Husband/IRA Owner – B/D 01/23/23
Betti – Wife – B/D 04/08/23
Shannon – Daughter/Contingent Beneficiary – B/D 01/26/51
IRA Values – 12/31/08 $375,093.22
– 12/31/09 $418,993.51
George died 05/11/08.
RMD was made in 2008.
IRA was never rolled over to spouse -Bettie.
RMD was not made in 2009 and was not required.
RMD for 2010 has not been made.
Bettie (primary beneficiary) died 04/30/10
Shannon (Contingent Beneficiary on Father’s IRA) wants to establish an inheriated IRA.
Does an RMD need to be made in 2010 for Bettie as primary beneficiary of George’s IRA?
Does Shannon’s RMD age begin in 2009 (The year following her father’s death) or 2010 (the first year RMDs are required following her father’s death), or 2011 (the year following her mother’s death even though her mother never owned the IRA)?
Permalink Submitted by Joseph Arsenault on Thu, 2010-06-17 21:39
Betties RMD still needs to be satisfied for 2010.
If the account was not retitled or rolled over, and literally title as an inherited IRA still, than the contingent would actually be the successor. That means she would be subject to whatever ADP (life expectancy for RMDs) that the deceased mother used.
Shannon’s RMD would be due by Dec 31, 2011. She would be forced to take the RMDs as if she was the mother.
My question would be, is there a way to still have the wife operate a qualified disclaimer since the beneficiary finalization date would have been Sept 30th? This would allow the assets to pass to the contingent and then she could use her own life expectancy.
Hopefully Bruce or someone else has some insight here. Maybe something I am missing. This is an interesting fact-pattern.
Permalink Submitted by mk foss on Thu, 2010-06-17 22:12
The spouse (Bettie) had 9 months from her husband’s death to disclaim the IRA and allow the daughter to be made the beneficiary. She didn’t do that – so the contingent beneficiary is eliminated from the picture.
Bettie had the ability to roll over the IRA and name new beneficiaries up until the day that she passed away. She didn’t do that. By not setting up an inherited account or doing a rollover, Bettie was “treating the IRA as her own” – which doesn’t resolve the beneficiary issue. Bettie’s RMD must be claimed from her husband’s IRA by 12/31/2010. It will be based on the 12/31/2009 value and Bettie’s age in 2010. The RMD goes to the beneficiary. The custodian’s adoption agreement will control who the beneficiary is: Often it’s the spouse if there is one or the estate when there is no surviving spouse; it could be children but I haven’t seen that in any adoption agreements.
There is a 50% penalty if the 2010 RMD is not withdrawn by 12/31/10. Since Shannon was not named as a primary beneficiary by her Mom, she could do an inherited IRA only if the estate assigns the IRA to her or if the custodian’s agreement names a child as a beneficiary. If the receives the IRA through the estate, she will need to use her mother’s remaining life expectancy instead of her own.
Unfortunate set of circumstances – unless the adoption agreement help.s
Permalink Submitted by Bruce Steiner on Thu, 2010-06-17 22:17
Betti had 9 months from George’s death to disclaim. If George died 5/11/08, Betti’s time to disclaim ran out 2/11/09. Her time to roll it over ended upon her death on 4/30/10.
Since Betti did not roll the IRA over, it is an asset of Betti’s estate, and goes in accordance with Betti’s Will, but will not be able to use his/her own life expectancy.
Shannon may wish to consider using counsel other than the one who handled George’s estate.
Permalink Submitted by Joseph Arsenault on Thu, 2010-06-17 22:18
Thanks for the correction, the disclaimer period is 9 months not the beni finalization date.
Sounds like a crappy situation.
Permalink Submitted by Joseph Arsenault on Thu, 2010-06-17 22:21
One question / clarification ..
If the daughter was the contingent, why would it go in accordance to the will? Does the contingent not carry on through the inherited IRA as the successor beni? Just curious.
Thanks
Permalink Submitted by Alan Spross on Thu, 2010-06-17 23:24
Joe,
No, as Mary Kay indicated, the contingent beneficiary was eliminated from the picture since the surviving spouse was alive at the time of owner’s death AND she did not disclaim her interest.
However, if the surviving spouse took action to name the daughter as successor beneficiary before passing, then the daughter would receive the assets directly. But since this was not done either, the surviving spouse’s will would come into play unless the IRA agreement carried specific overriding terms. If no will, then state intestate provisions.
I imagine that beneficiaries have been burned on this exact situation. The beneficiary assumes that the contingent beneficiary named by the IRA owner automatically becomes the successor beneficiary to the first beneficiary, and they therefore take no action to name their own successor beneficiary.
Permalink Submitted by Joseph Arsenault on Fri, 2010-06-18 14:03
Thanks for the clarification. That is interesting. For some reason I was under the impression that the beneficiary form from the original owner stayed intact.