IRA BDA Question
Hello,
I have a client (Ann) who passed away on Tuesday of last week. One or the beneficiaries, Sal, passed away on Thursday (2 days later). Can we confirm what account needs to be open to have Sal’s portion of the assets moved out of Ann’s accounts?
Will an estate BDA need to be opened for Sal’s portion? Please note, the other beneficiary on Ann’s account is Lucy and is Sal’s wife and the sole beneficiary of Sal’s account. Can Sal’s portion be moved to the BDA that is being set up for Lucy? Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2020-12-08 15:38
The IRA agreement should always be checked to determine the default beneficiaries, but it is most likely that this IRA will pass to Sal’s estate, since he was still living when Ann passed. So a BDA would have to be established for Sal, but he is unable to name his beneficiary and therefore his share will pass to his estate and become subject to probate. If Lucy is Sal’s executor, and the IRA agreement would pass Sal’s share to Lucy if Sal pre deceased Ann, then Lucy might be able to file a disclaimer on Sal’s behalf and the entire IRA would then go directly to Lucy. This is much simpler from an account standpoint and would keep his share from being subject to probate, however it could result in legal fees to get the disclaimer filed and might also be a problem in certain states, and there is a 9 month deadline to file a disclaimer from Ann’s DOD. Another factor to consider is whether Sal’s estate will be subject to probate (or an allowed form of abbreviated probate due to small size) anyway and if his share of the IRA would increase his estate to a more work intensive form of probate, so the size of his share will be a factor in whether to pursue a disclaimer or not. Either way, these shares will be subject to the 10 year rule under which there are no annual RMDs, but the beneficiary accounts must be drained by 12/31/2030. Start with checking the beneficiary clause in the IRA agreement.