Spouse as Sole Beneficiary
When we say the spouse, as sole beneficiary of the IRA, may elect to remain as beneficiary on the IRA of the deceased spouse, what is the IRS definition of “sole beneficiary”? Where in the code is that defined? Have a custodian saying that if there are contingent beneficiaries, the spouse cannot be the sole beneficiary. -m
Permalink Submitted by Alan - IRA critic on Sat, 2016-10-29 17:02
m- sounds like the custodian has read b) of A-7 of the following Reg, but did not read the exception in c). While the custodian is incorrect about the contingent beneficiary, the IRS has not clearly defined “WHEN” a surviving spouse must be the sole beneficiary. For example, if the surviving spouse is able to “assume” the inherited IRA as owner it is not real clear if they need to be the sole beneficiary at the time of death, on the beneficiary determination date (9/30 following year), or can become the sole beneficiary at anytime when they become the only remaining beneficiary of the account. Since the surviving spouse can take a distribution from the inherited IRA and simply roll it over (in excess of the RMD) to their own IRA, this rarely becomes an issue. It is interesting that in Pub 590 B, there are some references to “sole designated beneficiary” and some to just “sole beneficiary”. Are you concerned with whether the surviving spouse can “recalculate” their beneficiary RMD or not?https://www.law.cornell.edu/cfr/text/26/1.401%28a%29%289%29-5
Permalink Submitted by [email protected] on Mon, 2016-10-31 15:03
I guess I’m first trying to understand the definition – I would expect that “sole beneficiary” would mean Primary, since contingent only matter in the absence of a living/valid primary, correct? also, I may have been talking about “treating it as their own” instead of remaining as beneficial. thanks, -m
Permalink Submitted by Alan - IRA critic on Mon, 2016-10-31 21:25
Sole beneficiary does refer to the primary beneficiary, not to contingent beneficiaries who are not treated as primary beneficiaries unless the primary pre deceases the owner or a qualified disclaimer is filed by the living primary beneficiary. As for the primary treating the inherited spousal IRA as their own, there still remains a lack of guidance on WHEN that primary must be the sole beneficiary. The question is whether a primary who was NOT the sole beneficiary originally can become the sole beneficiary later on by various actions.