estate as IRA beneficiary

Submitted by Brian Devers on Wed, 2020-03-25 18:19

Aging client and her attorney want to name client’s estate as beneficiary of her IRA; will is to direct annual distributions, with amounts to charitable organizations. Client and attorney being a little close mouthed about the situation.

Among other problems:
– keeping estate ‘open’
– annual accounting required

Isn’t the BIG PROBLEM, with new SECURE ACT PROVISIONS, won’t this trigger a total withdrawal within 10 years???



Submitted by Alan - IRA critic on Wed, 2020-03-25 19:22

  • If client passes after her required beginning date, the IRA must be distributed over the remaining life expectancy of the client. That could be more or less than 10 years. The executor can assign the inherited IRA out of the estate to the will beneficiaries who will then have to continue the annual life expectancy RMDs based on decedent’s remaining life expectancy. If the executor keeps the estate open, the RMD will be distributed to the estate and can be passed through to the respective beneficiaries and taxed to the beneficiaries. Of course, the charities will want a lump sum distribution.
  • IF client passes prior to the RBD, the 5 year rule will apply. Since the estate is a non designated beneficiary, the Secure Act does not affect the distribution requirements.
  • If the individual beneficiaries of the estate are capable of handling an inherited IRA, they would be better off to be named outright, particularly if any individual qualifies as an eligible designated beneficiary for the stretch. Or a qualified trust might be beneficial for creditor protection, or for any special needs beneficiaries. 
  • If client lives past 80, the IRA would be drained in less than 10 years, before 80 would be more than 10 years. 

Submitted by Bruce Steiner on Sun, 2020-03-29 03:00

  • The issue isn’t keeping the estate open or accountings.  But it could create other problems.  Instead of trying to figure out what problems it might cause, it woud make more sense to ascertain what she’s trying to accomplish and recommend how best to accomplish her objectives.
  • If the amount is sufficient, it might make sense to create a foundation.  If not, it would probably make more sense to leave the IRA (on the beneficiary designation form) to the charities.
  • It would help to have a better sense of what she’s trying to accomplish.
  • What’s your connection to this?  She’s the IRA owner, and she has counsel.
  • Bruce Steiner

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