UNCLAIMED PART OF DECEASED’S IRA DISTRIBUTED TO ESTATE
89-yo woman died in 2019. Most beneficiaries of her IRA took their beneficiary IRA but one failed to respond to any contact from the IRA Trustee. At this same time, the IRA Trustee (USAA) was getting out of the investment business and transitioning all brokerage accounts, including brokerage IRAs, to another large investment company. But, said company refused to accept any deceased IRAs. Executor and remaining IRA beneficiary received many, many notices on this; Executor tried reaching out to recalcitrant beneficiary (based on an educated guess since IRA Trustee refused to name the beneficiary); nothing. The deadline came and the remaining deceased’s IRA was distributed to an investment account in the name of the deceased, resulting in a taxable event for the estate. Attorney advises that since the funds are now in the name of the deceased, with no named beneficiary of the funds, they are part of the Estate and subject to distribution according to the will. Question: Was there any action that could have been taken, in hindsight, to preserve this beneficiary’s IRA (not that he would have ever claimed it, anyway)?
Permalink Submitted by Alan - IRA critic on Tue, 2021-03-30 00:05
If this beneficiary was a designated beneficiary on the IRA, then such a distribution would be taxable to that beneficiary, not to the estate. The 1099R would be sent to the last known address of this beneficiary, and if the address were incorrect or the person did not respond, eventually this account would be escheated to the state, and the beneficiary might have a very hard time recovering this money. Unless this IRA agreement contains a very unusual provision such as a non responding beneficiary would be eliminated after a time, I don’t know how these funds ended up in the decedent’s estate. Further explanation is required. and perhaps the beneficiary clause of the decedent’s IRA should be closely reviewed.
Permalink Submitted by Susan R-S on Tue, 2021-03-30 00:40
Interesting. Yes, the beneficiary was a designated beneficiary on the IRA. I need to get with the prior IRA custodian on this if the funds should have been in his name even though he never sent in paperwork to claim it and they didn’t have his SSN. Though, if they didn’t know/have his legal name or an SSN I’m not sure how they could have created the account in his name and sent him the 1099R. Because the beneficiary did not respond, the distribution was made to an account in the name/SSN of the deceased and the 1099R was sent to her. I’ll dig into this again. Thank you.