Post Death IRA Beneficiary Changes
I was in the middle of changing the beneficiaries of a client’s IRA when she suddenly passed away before she could sign off on the beneficiary changes. Now her only beneficiary is still listed as her living trust instead of equal 25% share distributions to each of her four adult children. All four beneficiaries planned on setting up stretch outs. Interestingly, her living trust also lists her four children as beneficiaries of the remainder of her estate in equal 25% portions.
My question: Can we either 1) modify the now post death beneficiary disignations to her four children in a manner to allow them to each set up stretch outs, 2) if the answer to 1) is “no” then can her living trust be modified to allow the trust be set up as a holder of the IRA, thus paying out based on the oldest beneficiaries age but still better than not having a designated beneficiary at all or 3) the client’s kids are screwed and have to take all distributions over the 15.3 years?
I would appreciate anyone’s help on this.
Thanks,
Thomas Quinlin
Permalink Submitted by Alan Spross on Wed, 2008-10-08 02:57
Thomas,
Reference to 15.3 years I assume means that she is 71 this year.
The IRA beneficiary statement cannot be changed after the owner’s death, and most IRA agreements require the IRA custodian to actually be in possession of beneficiary changes when the owner passes.
Perhaps the trust is qualified for look through treatment. These requirements are listed in Pub 590 on p 39. If it is qualified, the trust must become irrevocable upon the owner’s death, therefore the trust cannot be changed at this point if it does not meet the requirements. The trust is apparently listed as the named beneficiary on the IRA agreement, so that requirement is satisfied. A trust cannot be the “holder of the IRA”.
If the trust does meet the requirements, then the RMD period will be based on the oldest beneficiary of the trust. If not, then the remaining non recalculated life expectancy of the decedent will apply for RMD determination of distributions to the trust.