Inherited IRA

Submitted by Sandra Owens on Mon, 2017-04-10 19:34

My client John Doe died on 2/24/17 leaving his wife (Mary Doe) as primary beneficiary of his IRA and his 3 children as contingents. No RMD was taken for 2017. Before we could process any paperwork, Mary Doe died on 4/02/17. Should the executor request the 2017 RMD first and divide it equally among the children. Then open each child an Inherited IRA and split the account balance 3 ways. I know the registration is important. Would the Inherited IRA’s be titled Beneficiary of John Doe?



Submitted by Alan - IRA critic on Mon, 2017-04-10 23:34

  • The beneficiary clause in the IRA agreement should be checked ASAP to determine the beneficial owner of this IRA. Obviously, the IRA first passed to Mary which would void the contingent beneficiaries. Then if Mary did not name her own beneficiaries before passing, the IRA would go to Mary’s estate with beneficiaries per her will. The way to restore this IRA to the contingent beneficiaries is to have the executor of Mary’s estate disclaim the IRA. Mary would then be treated as pre deceasing John and his IRA would go to the 3 childen as equal designated beneficiaries. They could then each use thier own life expectancies for RMDs after creating separate inherited IRA accounts by the deadline. The year of death RMD is not a priority at this point and should go on the back burner until the IRA agreement is reviewed and a decision made regarding a qualified disclaimer.
  • If no disclaimer is filed and the children inherit this IRA through Mary’s estate, even if the executor of her estate eventually assigns the IRA to the beneficiaries under her will (or intestate beneficiaries if no will), those beneficiaries will have to calculate their inherited IRA RMDs using Mary’s remaining life expectancy based on the age she would have attained on 12/31/2018.
  • The disclaimer decision will be affected by the size of this IRA and the desire of the children to stretch the IRA beyond the limited period of Mary’s remaining life expectancy.
  • I assume that John passed AFTER his required beginning date from your post, but this needs to be confirmed because all these rules change dramatically if he passed PRIOR to his RBD.

Submitted by Sandra Owens on Tue, 2017-04-18 16:33

Yes, John Doe was 88 when he died and was waiting to take his RMD later in the year.  Thank you for this information.

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