No Beneficiary Listed
Taxpayer died at the age of 82. IRA beneficiary form apparently was not completed. Spouse, 81 years old still alive and executor of estate. Since beneficiary form was not completed IRA holder states IRA to go to estate. Spouse does not want proceeds and in fact already trying to get money out of her name and will be disclaiming most of assets. Children will be beneficiaries of estate. Will the children be required to take distributions based on deceased’s life expectance (minus 1 each year)? Are there any other options available to stretch this?
Permalink Submitted by mk foss on Wed, 2013-07-10 16:05
When younger individuals are not named as beneficaries and the estate becomes the default, stretch opportunities are not available. The decedent’s age will be the only option. If the surviving spouse could claim it and do a rollover (which she doesn’t want), she could name younger beneficiaries who could use their own life expectancies once she passes away. That’s the only stretch opportunity that I see.
Permalink Submitted by Michael Jorganson on Tue, 2013-07-23 20:14
Thanks for the original reply. But of course nothing is easy!What are the proper steps to get this to the beneficiaries of the estate? According to the trustee of the IRA, since there was no beneficiary named they are distributing the full IRA to the estate. Doesn’t this become a taxable event if distributed to estate? My thoughts were that the beneficiaries would have to open IRAs with the same trustee with the deceased name as part of the title and the executor of the estate should have them transfer the IRA equally to the two beneficiaries. Am I close?
Permalink Submitted by Alan - IRA critic on Tue, 2013-07-23 22:26
Note that the a surviving spouse disclaimer or partial disclaimer of the estate assets will result in the children receiving the IRA proceeds assuming they are next in line to inherit. However, as estate executor the surviving spouse must request that no IRA distributions be made to the estate, rather the IRA should be assigned to the estate beneficiaries (the children) who can then transfer the inherited IRA to separate inherited IRAs and use the decedent’s remaining life expectancy for RMDs. While the stretch would be limited compared to their own life expectancies, if the surviving spouse instead pursued a rollover there is no telling how long the surviving spouse would live and how much of the IRA would be distributed with surviving spouse’s own RMDs should surviving spouse live into their 90s.
Permalink Submitted by Bruce Steiner on Wed, 2013-07-24 02:02
Would a rollover (if possible) followed by a Roth conversion accomplish her objective with a better tax result?See my article on spousal rollovers where the spouse is not the named beneficiary in the October 1997 issue of Estate Planning: http://www.kkwc.com/docs/AR20050125164755.pdf
Permalink Submitted by Michael Jorganson on Thu, 2013-08-15 15:56
Thanks to all who have contributed feedback! Unfortunately, it is not resolved yet. Apparently the custodian does not permit the IRA to be assigned to the estate beneficiaries. Reading the various discussion boards here I see it mentions Fidelity & Vanguard permit this. At this time the IRA is still in the name of the deceased. For the executor to transfer to a different custodian, does the IRA first need to be renamed into the estate name?
Permalink Submitted by mk foss on Thu, 2013-08-15 16:43
The current custodian will need to transfer the IRA to a beneficiary IRA with the estate named as the beneficiary before you can have the funds transferred to a new custodian.