QRP Successor (Not Contingent) Beneficary Issue

Submitted by John Cella, Jr on Fri, 2014-11-21 15:37

QRP participant (Mom) died in 2012 after her RBD. Adult child A and adult child B were beneficiaries of Mom’s QRP. Child B died in 2013 before initiating non-spouse rollover to inherited IRA. Child B, who was incompetent upon Mom’s death, died unmarried, childless, and intestate, leaving Child A as the sole heir at law.

Child A wants a non-taxable, direct plan-to-IRA TRANSFER of dead Child B’s half of Mom’s QRP to an IRA that will pay out to Child A over dead Child B’s remaining life expectancy … i.e.,

IRA Mom (DECD) f/b/o Child A, Bene of Estate of Child B, Bene of Child B, Bene of Mom

Child A doesn’t want a lump sum distribution from QRP to dead Child B’s estate under the estate’s FEIN.

I’m getting inconsistent communications from QRP and still do not have QRP documents to evaluate … how do QRPs typically treat the “successor beneficiary” situation?

Any thoughts would be much appreciated.



Submitted by Alan - IRA critic on Fri, 2014-11-21 21:48

  • Child A will not be able accomplish this.  Under Sec 402(c)(11), a direct rollover to an inherited IRA of a designated beneficiary is permitted, but when Child B passed he was no longer a designated beneficiary and his estate cannot be treated as a designated beneficiary. Therefore, this is not a case of the plan being more restrictive than the IRS Regs, as the IRS Regs do not even allow a direct rollover in this situation. The QRP will most likely simply issue a lump sum distribution to Child B’s estate. The QRP would be allowed to issue RMDs to B’s estate in lieu of an LSD if the plan allowed for that, but I doubt there are any plans that would. The result would be that the LSD of Child B’s interest would be taxable to the estate and could be passed through to A as a beneficiary of B’s estate.
  • Conversely, had B done a direct rollover to an inherited IRA before passing and before 12/31/2013, he would have been able to stretch the RMDs over his life expectancy and when he passed if A was listed as successor beneficiary, A could have continued B’s life expectancy RMDs.


Add new comment

Log in or register to post comments