IRAs and Probate

Submitted by Scott Carbaugh on Sun, 2017-01-08 06:30

If your beneficiaries are properly updated, upon the IRA owners death, can those beneficiaries have the IRA transferred to their names without a will or probate proceedings?

Same with 401k, 457 and 403b?



Submitted by Alan - IRA critic on Sun, 2017-01-08 17:03

Yes, retirement accounts of all kinds that pass directly to designated beneficiaries can be retitled in beneficiary format with no involvement from the estate executor. A trust beneficiary also avoids probate. The executor may provide helpful information to the beneficiary such as ordering enough death certificates to provide to beneficiaries, advising the beneficiaries if they must complete the year of death RMD for the decedent, provide will beneficiary information in the event a beneficiary wants to disclaim etc. But a beneficiary can proceed without any dealings with the executor if they wish. Note that even if beneficiaries are “not properly updated” and an unintended beneficiary is designated, the same rules apply.

Submitted by William Tuttle on Sun, 2017-01-08 18:06

It may not change the fact that all beneficiary accounts/distributions fall outside the probate process. However, estate/inheritance taxes can still be assessed on many accounts that pass outside the proccess. This is not usually a problem with the federal estate taxes because the exemption is so high. Some state estate tax exemtions are much lower. Thankfully, the state with lowest estate tax exemption NJ, is raising it to $2M in 2017 and going away in 2018, but their inheritance tax is staying. Note: A will can usually direct an estate with sufficient assets to pay estate taxes on assets passing outside the estate. This is often better than leaving the liability to the individual beneficiaries.

Submitted by Ben Meyer on Sun, 2017-01-08 20:14

  • Someone may be needed to perform certain coordination duties, such as the executor or successor trustee, if a trust is involved.  If none of these are available, some other individual close to the deceased person may perform the necessary tasks.  Such things are required as giving the beneficiaries a copy of the most recent form 8606 filed by the decedent, if there were IRA nondeductible contributions, and advising each beneficiary the percentage applicable to each one.  Coordination of tax reporting may also be needed, to insure that any post-death distributions are not reported against the SSN of the decedent, since some institutions may make this mistake.  These tasks are in addition to allocating any estate or inheritance tax, although the institutions involved may also take a role in that, depending on specific state requirements.
  • Successfully performing these tasks requires the cooperation of all beneficiaries and possbly the IRA custodian.

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