probate courts power to override IRA payout options

Submitted by Hank Stabler on Wed, 2009-01-28 03:11

The deceased had an IRA with no beneficiary named so account transfered to estate of…Ohio County Probate magistrate demands probate be completed and estate distributed ASAP.

Company providing IRA would allow the payout option for heirs of the estate to be done on basis of deceased life expentancy (8.1 years in this case) however this would require an executor to be an administrator for the account which was transfered to the estate of… The court refused to allow estate to be held open to the financial detriment of the heirs.

It appears the court has the power to override the extended payout option provided to heirs by IRS?



Submitted by Alan Spross on Wed, 2009-01-28 03:41

Natalie Choate recently issued a bulletin on this issue, although her main concern was with the IRA custodian. In this case the Probate Court is the problem, but there should be no need to keep the estate open if the IRA can simply be distributed in the form of beneficiary accounts. This would satisfy the court’s desire to close the estate, and it seems the IRA custodian is already on board with this.

http://www.ataxplan.com/bulletinBoard/ira_providers.cfm

Submitted by Louis Napoli on Wed, 2009-01-28 04:02

It doesn’t sound like the Court is being too amenable, but would it be possible to explain to the Court the severe and permanent detriment that its demands would wreak on the estate? And then get an extension of time from the Court?

Submitted by mk foss on Wed, 2009-01-28 17:57

Often the executor of an estate wants to be discharged before the payout period for the IRA has ended. The usual procedure is to have the probate court “assign” the IRA interest to the beneficiaries. There have been rulings in the last few years saying this is OK. Also many people have done it before we saw the first ruling.

I think everyone involved should be happier to have the IRA assigned than to keep the estate open and under the jurisdiction of the court for a number of years.

Of course, assignment to the beneficiaries does not increase the pay out period.

Submitted by Bruce Steiner on Thu, 2009-01-29 23:59

The court doesn’t assign the IRA. The executor assigns the IRA, just as he/she would distribute the other assets to the beneficiaries.

The key is explaining this to the IRA custodian, but by now they should be familiar with this.

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