IRAs via Estate
Dad’s spouse died late January 2012 and Dad was the named beneficiary of her IRA. He was deemed incompetent at that time and we were working with an attorney to gain guardianship before filing claim to her IRA on his behalf. Late March 2012, Dad passed away and now investment company holding Dad’s spouse’s IRA is saying they cannot pass the IRA to him since he was not able to sign the necessary paperwork transferring it to him prior to his death. As far as we know there is no secondary or contingent beneficiary named. So who is the beneficiary and how do we process that claim? Similarly, since Dad’s death and his IRA beneficiary was his now-deceased spouse, who is the beneficary of his account since again there was no named contingent beneficary? Dad’s estate is going through probate in state of Arkansas if that information is relevant.
Permalink Submitted by Jose Morales on Fri, 2012-05-04 15:36
You will want to look at the IRA Agreement that they both signed to see who the default beneficiary is in the event that the named beneficiary passes before claiming the funds or setting up a beneficiary IRA. More likely than not the resepective estates are the default beneficiaries, but you must confirm that with the actual agreement signed by the IRA owners.
Permalink Submitted by Douglas Mech on Fri, 2012-05-04 15:52
Thank you. Is there a valid legal assertion to have the spouse’s account rolled into Dad’s IRA for future distribution to the heirs named under his will via the estate? I am considering asking the estate attorney to pursue the matter in that direction. That would seem the logical progression, but I realize that these matters don’t always follow logic.
Permalink Submitted by Alan Spross on Fri, 2012-05-04 19:22
Ownership of the IRA was not assumed by Dad, and he passed too soon to have acquired default ownership due to failing to take an RMD required as beneficiary of his spouse’s IRA. As urusei indicated, verify with the custodian that Dad’s beneficiary interest will pass to his estate per the terms of the IRA agreement. If so, the executor can eventually have the IRA assigned to the beneficiaries under his will and have separate accounts created.
The above addresses WHO will essentially inherit the IRA proceeds pending probate of the will.The following addresses the RMD requirements.
The RMD requirements for will beneficiaries constitutes the other rather confusing issue.
1) For 2012, the estate (assuming estate is default beneficiary) or the estate beneficiaries if the IRA can be distributed out of the estate before 12/31/2012 needs to take out the same RMD that Dad’s spouse would have had to take for 2012, the year of death of the IRA owner.
2) For 2013 and beyond, since Dad passed before he was required to take distributions as beneficiary of spouse’s IRA, Dad is treated as the IRA owner. Assuming Dad passed after his RBD, the estate or will beneficiaries will have to use Dad’s remaining life expectancy for RMDs starting in 2013. For example, if Dad was 80, the inherited IRAs for each will beneficiary would last 10.2 years.
NOTE: If decedent’s passed prior to their RBD, the rules change. Please advise should that be the case.
Permalink Submitted by Bruce Steiner on Sun, 2012-05-06 02:56
It’s worth checking to see if the children are the default contingent beneficiaries. If so, then Dad’s estate might be able to disclaim the IRA on Dad’s behalf. In some states, a disclaimer by an executor requires court approval, so if this is a possiblity, allow sufficient time to obtain court approval. We’ve obtained court approval for disclaimers by executors where the affected beneficiaries of the estate whose executor wanted to disclaim consented.
Why didn’t Mom name the children, or trusts for their benefit, as contingent beneficiaries?