Estate as beneficiary
Hello,
Bob had a vested and accrued balance in his former employer’s Profit Sharing Plan. He passed away a few years ago.
As there was no beneficiary designation form on file, the benefit would be paid to his surviving issue (as he was not married); in Bob’s case, his 2 children, equally.
Since Bob passed away after his RBD, annual RMDs have been made payable by the Plan to his estate.
His children are now going to be taking the balance from the Plan.
Since (a) there was no Beneficiary Designation Form on file and (b) they inherited according to the default terms of the Plan, are they permitted to establish Inherited IRAs? The actuarial firm offered this as an option and I just want to confirm it is indeed correct and allowed.
Thank you.
Jason
Permalink Submitted by David Mertz on Tue, 2018-11-06 22:14
If the default beneficiary under the plan is his surviving issue, why has the plan been making distributions to Bob’s estate?
Permalink Submitted by Alan - IRA critic on Tue, 2018-11-06 22:38
Yes, something is haywire here. If his estate inherited, the RMDs would be based on Bob’s remaining life expectancy, and no assignment to inherited IRAs is possible. But if the children were the default beneficiaries, the RMDs would be based on the oldest of the two as it sounds like separate accounts for each were not created by the deadline. But in this case, assignment could be made to inherited IRAs for each (RMD based on oldest child) since the plan would have a designated beneficiary. Therefore, some clarification of the beneficiary situation is needed before the RMD situation can be cleared up.