IRA Death Claim
A quick question, a client’s spouse passed away and the IRA Adoption agreement specifies her mother and brother as beneficiaries will split her IRA 50/50. The broker-dealer on this account is telling the husband that the beneficiaries must each set up Inherited IRA’s to receive the proceeds. Can you confirm?
What options does the surviving spouse have since it appears that he’s been shut out?
Permalink Submitted by Bruce Steiner on Thu, 2008-07-31 20:51
Claim the elective share, if available under state law.
Permalink Submitted by Al Fry on Thu, 2008-07-31 21:23
If she wanted her husband to have the IRA, why wasn’t he named as bene?
Permalink Submitted by Alan Spross on Fri, 2008-08-01 03:35
This seems like two unrelated questions.
The surviving spouse may have options under state law, however the statement from the broker-dealer makes no sense since the husband’s legal right to any of the proceeds would not be affected by whether separate accounts were set up in a routine IRA administrative action or not. Separate accounts only allow each beneficary to use their own life expectancy in lieu of that of the oldest if the separate accounts are established by the end of the year following death.
If an elective share were available, it should be enforceable regardless of whether the designated beneficiaries set up separate accounts or not.
Permalink Submitted by [email protected] on Fri, 2008-08-01 16:48
So the beneficiaries could receive their shares directly from the custodian without the requirement of setting up inherited IRA accounts?
Permalink Submitted by Al Fry on Fri, 2008-08-01 17:36
If a non-spouse bene wants a lump sum with immediate taxation, there would be no need for an inherited IRA. If they want a stretch, they’ll have to have a inherited IRA. A spouse bene can go to an inherited IRA (if under 59 1/2) or to their own IRA. Or a spouse can take a distribution and keep it or roll it to an IRA within 60 days.
Permalink Submitted by Janine Janine on Sat, 2008-08-02 00:40
My understanding is that designated beneficiaries of an IRA or Trust supersede any other instrument, including a will….at least in Massachusetts. Unless the law has changed recently, the husband would be out of luck in MA.
Permalink Submitted by Alan Spross on Sat, 2008-08-02 01:22
That’s correct. The IRA beneficiary clause determines where the IRA funds go.
However, I think what Bruce is referring to is an overall spousal election that can apply to the entire estate of the deceased spouse. If the spouse could elect 50% and more than 50% of the total decedent’s estate was left to others, the spouse could claim against the probate assets to recover the difference. If the IRA was the total value of the decedent’s estate, and there was no way to recover 50% from other assets, then it may be possible to bring suit to recover from the IRA. I have no idea how many state provisions would permit this.
Community property states present a similar situation where community assets are deemed to be owned 50-50 regardless of how an account may be titled. In order to avoid litigation, the spouse may be asked to sign a waiver if the other spouse named a non spouse beneficiary on a large IRA account.
Permalink Submitted by Bruce Steiner on Sun, 2008-08-03 01:44
In some states, the recipients of nonprobate assets contribute pro rata to the elective share.