Non Spouse Beneficiary of IRA/Probate
Dad died at 86 in May and had been taking RMD since age 70 1/2. Credit Union is willing to do a trustee to trustee transfer to my bank to open a new inherited IRA. After I set up new inherited IRA account, when do I need to start taking distributions (I’m 45)?
Mom died 8 months ago, her small IRA had NO designated beneficiary. I assume this has to be probated and want to know who owns this IRA after probate is completed. Parents had a Living Trust. I am the successor trustee
Permalink Submitted by Alan Spross on Fri, 2009-07-17 21:30
Sorry to hear of your losses.
Presuming you are the beneficiary of your father’s IRA, your own RMDs do not start until 2010 with the deadline of 12/31/2010 to take the RMD based on your non recalculated single life expectancy. Use the age you will have reached as of 12/31/2010. You do not have to be concerned whether your father took his 2009 RMD or not because Congress waived the 2009 RMD in December, 2008 legislation. However, just in case, you should track any potential continuation of that waiver in case late this year Congress decides to extend the waiver to 2010. I don’t expect that, but is is altogther possible. Remember that there are no rollovers permitted from a non spouse inherited IRA, so any distributions you receive are irrevocably taxable. Because of that I would not set up any automatic distributions with the new custodian until you are sure that your must take those 2010 RMDs. You should also name a successor beneficiary on the account ASAP.
Regarding your Mom’s IRA, the default beneficiary is stated in the IRA agreement. While it is quite likely to be her estate and subject to probate as you indicated, it is also possible that the default states that it goes to a surviving spouse, which would be your Dad at the time of her death. If her estate is indeed the default beneficiary, it might end up in her trust through a pour over will, if it exists. For RMD purposes however, since the trust was not named as beneficiary on the IRA agreement, the IRA is considered to have a non individual beneficiary. This will result in RMDs being based on your Mom’s remaining life expectancy rather than that of the trust or estate beneficiary.
Finally, you should check into whether either parent ever made non deductible contributions to their IRAs in any year after 1987. Look for Form 8606 on their recent tax returns. Since they were taking RMDs, you should check the most recent returns first, and they would show the amount of any remaining basis in the accounts. If there is some, the beneficiary inherits the remaining basis and it would result in RMD distributions being less than 100% taxable.