Inherited IRA (primary bene predeceases account owner)

Submitted by ShipsnGiggles on Fri, 2014-10-31 15:41

Good Morning,

T-IRA account owner, > 70.5 dies in 2013
Primary beneficiary was his wife – who predeceased him
He did not name a contingent beneficiary
Custodial Agreement states trust inherits (due to no named beneficiary)
Two sons are beneficiaries of the estate

Questions:
Does the fact the primary beneficiary (spouse) predeceased the account owner impact the sons inheriting the IRA via the estate?
Or do the normal rules apply upon an estate inheriting when the account owner was >70.5? Life-expectancy payout (stretch) using the deceased’s age assuming they had lived or the 5-year payout?

Thank you in advance

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Permalink Submitted by Alan - IRA critic on Fri, 2014-10-31 19:11

I think you meant that the default beneficiary in this case is the estate, not a trust. Since the primary beneficiary pre deceased the IRA owner, the estate becomes the beneficiary. Owner must have reached the RBD which comes after 70.5 for the estate or beneficiaries of the estate to apply the owner’s remaining single life expectancy for their RMDs. They must also complete the year of death RMD if owner had not completed it. The 5 year rule does not apply when the TIRA owner passed on or after the RBD. The sons cannot use their own life expectancies since they were not designated beneficiaries.

Permalink Submitted by mk foss on Fri, 2014-10-31 19:13

Contingent beneficiaries are named just to handle this type of situation. Your facts are confusing because the treatment differs if a trust is the contingent beneficary or the decedent’s estate. It would be odd of the custodial agreement named a trust. When the estate becomes the beneficiary and the IRA owner was passed the RBD, the owner’s life expectancy from the single life table is used for RMDs beginning in the year after the death. The executor can have the benefits assigned to the estate beneficiaries in order to close the estate when the administration is complete.