Husband dies with IRA with wife as primary beneficiary who then dies 7 weeks later before doing spousal rollover

Submitted by John Foster on Fri, 2018-06-15 22:17

Husband dies with IRA with wife as primary beneficiary who then dies 7 weeks later before doing spousal rollover
Husband was past RBD and taking withdrawals. He was about 90.
The wife was named as primary but didn’t complete a spousal rollover.

There are 3 children who expect to be the beneficiaries.
Does the IRA pass to the estate that then establishes an inherited ira fbo the estate of the mother?
Then when the estate closes does the estate distribute the inherited IRA to each of the children who can then set up an inherited IRA in their name but then use the Table I divisor -1?

Alternatively-if the children were named contingent beneficiaries of the fathers/husbands IRA could the executor disclaim the wife/mother and then the IRA could then be distributed to the 3 children who could then use their own life expectancy?

Also alternatively-am I correct in understanding that the children in either case take their inherited IRA and acquire an immediate annuity? I’m considering one with a COLA that would then pay out a lower amount than the RMD would have required and a higher amount later which would work better for tax purposes as the children are currently working



Submitted by Alan - IRA critic on Sat, 2018-06-16 03:26

  • The beneficiary clause of the IRA agreement should always be examined to determine the beneficiary defaults. Most likely the estate of the surviving spouse would be deemed the beneficiary, and her will beneficiaries would inherit the IRA. It is also possible in many cases for the executor of the wife to file a qualified disclaimer. State laws might come into play regarding how the disclaimer is filed or for example if the surviving spouse named her own beneficiary, whether that would disqualify the disclaimer.
  • The children can only use their own life expectancy if they were named as contingent beneficiaries and the disclaimer was effective. Otherwise, if wife’s estate inherits as expected, the applicable distribution period for the inherited IRA will be wife’s remaining life expectancy whether her executor assigned the IRA to the estate beneficiaries or not.
  • An immediate annuity might not produce distributions high enough to meet the requirement of the RMDs using wife’s remaining life expectancy. And once an estate inherits the IRA, the IRA custodian will probably attempt to make a lump sum distribution, but that can be resisted unless the IRA agrement states otherwise.

Submitted by Bruce Steiner on Sun, 2018-06-17 02:38

  • You should check to see whether the children are the contingent beneficiares, either under the beneficiary designation or under the default provisons of the IRA.  That would usually be the case. 
  • If so, the wife’s executors could disclaim on her behalf.  In some states, her executors would need court approval.  Most likely the wife’s executors would be willing to disclaim the IRA if it would pass to the same people who are the residuary beneficiaries of the wife’s estate, or if the residuary beneficiaries of the wife’s estate consent to her executors disclaiming it.
  • That would permit the children to stretch the IRA over their life expectancies.
  • Note than in some states an executor needs court approval to disclaim.
  • Bruce Steiner

Submitted by John Foster on Mon, 2018-06-18 21:29

I will follow up on these suggestions-Here’s some info on RMDs and immediate annuity payouts-https://www.immediateannuities.com/required-minimum-distribution/

Submitted by Bruce Steiner on Tue, 2018-06-19 02:37

While an annuity is the only way to protect against living too long and running out of money, it comes with a substantial economic cost.

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