IRA with no living beneficiary or no beneficiary designation or signing card form
An elderly aunt does intestate. Two of her IRA accounts had no living beneficiary, and the bank could not find updated forms. They distributed the IRAs to other family members and did not consider all the legal heirs. Should these accounts have gone into the estate? Can the bank do this legally? Is there an IRS statute that covers IRA distribution when there is no current signing card or beneficiary designation form?
Permalink Submitted by William Tuttle on Mon, 2016-10-17 17:54
I think a little more information is necessary. What do you mean by “all legal heirs”? Intestate laws are very specific and banks are the most conservative of any financial institutions. Distributions would have to be in accordance with the bank’s IRA documents. I would be very surprized that a bank would make distributions not on accordance with state law and their IRA documents. Finally, are you sure the bank distributed the assets to the familay members or they simply distributed them to the estate and the estate distributed them to the heirs via probate?
Permalink Submitted by Alan - IRA critic on Mon, 2016-10-17 18:42
The IRA agreement of the custodian states where the death benefits go if the owner does not specify a beneficiary. For a married owner, the default beneficiary is usally either the surviving spouse or the estate. For non spouse beneficiaries the estate is by far the most common default beneficiary, although some agreements may specify children. Banks typically try to push distributions to the estate so the executor becomes responsible for determining who the beneficiaries are under the will or what the state intestacy provisions specify. Therefore, your information appears inconsistent with the usual practice of IRA custodians. Obviously, if the bank acted in violation of their agreement or state law, they become legally responsible for the resulting damages.