Inherited IRA
Father owned an IRA and passed away 12/30/08. RMDs for the year had been withdrawn. Mother (spouse) was listed as primary beneficiary and daughter as contingent. Mother passed away 2/2/09 without electing for her husbands IRA to be retitled as a spousal IRA account. In fact, no action had been taken regarding the Father’s IRA prior to Mothers death. In retitling the IRA as a benficiary IRA fbo of daughter, I assume the Father’s name remains on the title fbo daughter as the mother never actually inherited the account. Is this correct.
In a related development, Father & Mother were joint owners of a non-qualified annuity which provided some leverage in the form of LTC benefits. Each was covered under the LTC and each was the others primary beneficiary of the non-qualified annuity. The daughter was listed as contingent owner of the contract. Same facts as above. When daughter is listed as the owner is there any immediate tax consequences if the contract remains in tact albiet without LTC benefits. Is this considered IRD under the father’s final tax return, the mother’s or is income tax due on the gain in the contract payable by the daughter?
What if the contract is exchanged for a more appropriate contract given the lack of LTC for the dauter?
Any help will be appreciated.
Permalink Submitted by Alan Spross on Wed, 2009-03-25 21:29
The contingent beneficiary does not come into play here since mother was alive when father passed. Mother did inherit the IRA, but apparently did not name a successor beneficiary. More than likely, mother’s estate will become the successor beneficiary barring specific terms in the IRA agreement to the contrary.
I would check with the insurance company on the annuity options, and perhaps here the daughter will acquire beneficial ownership as the contingent beneficiary of both parents. Distributions to the daughter will be taxed in the same fashion as if they were distributed to the parents. With more recent annuities, earnings come out first unless the contract is annuitized.