No bene on an ira

Submitted by Darlene Lukaszewicz on Wed, 2018-12-19 20:42

Clients mom left no bene on her ira. She died June 2017. Probated estate. Bank said the only option is moving Acct from mom ira to decd ira fbo estate and then send the check out to estate. Any other alternatives. Will does not state anything re ira bene. If not is there a way to help defray the taxes. Possibly distribute the distribution to ultimate beneficiaries and then the would be taxed and not estate??



Submitted by Alan - IRA critic on Wed, 2018-12-19 20:49

What was mom’s age at death?

Submitted by Darlene Lukaszewicz on Wed, 2018-12-19 21:04

80s

Submitted by Alan - IRA critic on Wed, 2018-12-19 22:19

  • The will beneficiaries will inherit the IRA through the estate, and the executor can assign the IRA ratably to the beneficiaries in the will. Each such beneficiary can have their own inherited IRA, but the RMD distribution period will be based on Mom’s remaining life expectancy from Table I in Pub 590 B.  For example, if Mom would have been 85 at the end of 2017, the RMD divisor for 2018 would be 6.6, 5.6 in 2019 etc with the divisor reduced by 1.0 each successive year. 
  • IRA custodians, and banks in particular try to pressure executors to accept a lump sum distribution when the estate is the beneficiary. This has nothing to do with IRS rules, the bank just wants to avoid any estate issues, and many do not want to open inherited IRAs for the beneficiaries. The bank should be asked to cite the section of the beneficiary portion of their agreement that states they will be issuing a lump sum distribution. If there is such a provision, the only escape would be to transfer the IRA to another custodian without such a provision and resist all distributions in the meantime. Finding another custodian to accept the IRA may be challenging however. The place to start would be the institution that the beneficiary already has most of their assets with, as that might provide some leverage to have the current IRA transferred there. However, if the balance is small, this might not be worth the trouble.

Submitted by Darlene Lukaszewicz on Thu, 2018-12-20 02:29

Thanks!!! Is it a problem that the moms ira is still in tact under her name even tho she died in June 2017. Shouldn’t the ultimate benes needed to set up a decd ira within one year? Or at least haveN taken their respective rmds by dec 31 2018??? So logistically I’m not sure what to do. Bank said they would only do a decd ira fbo kids if there was ppwk from the courts? Seems like the executors could write a letter designating the Benes? Yes. Thanks!!!!

Submitted by Alan - IRA critic on Thu, 2018-12-20 03:36

The major problem is that during the delay the account is essentially frozen, so no one can change the investments, no one will be in charge of their own inherited IRA, and RMDs will be late. But with respect to the late RMD, the penalty can be waived by the estate filing a Form 5329 and indicating estate delays as the reason. The executor for some reason has not received letters testimentary from the probate court authoring the executor to take charge of the estate assets. All these problems can stack up, but having no control over the investments in the IRA is probably potentially the largest problem given what the markets have been doing recently.

Submitted by Darlene Lukaszewicz on Fri, 2018-12-21 02:16

They got letters testamentary Early 2018. Sent it to the bank. The bank never followed up. So I got involved. So does the executor just need to send a letter to the bank ira dept stating the designated beneficiaries and set up a decd ira?  Can’t thank you enough. 

Submitted by Alan - IRA critic on Fri, 2018-12-21 02:34

Not sure who is executor, but the executor needs to send a letter to the bank requesting transfers to separate inherited IRAs for each beneficiary. Provide name, address, and SSN of each beneficiary and what their share of the inherited IRA is. Each beneficiary will probably have to notify the bank separately of who they appoint as their own beneficiary.  Any late RMDs can be requested by each beneficiary, but a 5329 will need to be filed requesting a penalty waiver for each year and RMD was late. The late RMDs need to be distributed before filing the 5329.

Submitted by Darlene Lukaszewicz on Fri, 2018-12-21 03:19

Got it. The executors are faughter son and they are also benes if the will. Can’t thank u enough. Merry Christmas 

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