Estate treated as designated beneficiary
It has been my understanding that an estate can never be a designated beneficiary. (Reg 1.401(a)(9)-4, A-3(a))
Accordingly, it is my understanding that if an IRA owner dies after her RBD, leaving the IRA to her estate, then distributions must be taken over what would have been the owner’s remaining life expectancy. Reg 1.401(a)(9)-5, A-5(a)(2))
However, I recently received a Beneficiary Authorization Form from Citibank that is written for the executor to complete. The form indicates several distribution options and states specifically:
[quote]”If you elect so by December 31st of the year following the year of death, you may take distributions from the plan as calculated by the Single Life Expectancy factor of the oldest or only beneficiary of the Estate, if all beneficiaries of the Estate are persons. If all beneficiaries are not persons, you may take distributions from the plan as calculated by the Single Life Expectancy factor of the deceased, or at an accelerated rate.” [/quote]
This is a fairly new form, as it notes the 2009 moratorium on RMDs. I am not aware of any new rule that allows an estate to elect to take distributions based on the ages of the estate beneficiaries.
Have I missed something, or does this appear to be an error in Citibank’s form?
Thanks,
Jeff Holman
Los Altos, CA
Permalink Submitted by Alan Spross on Fri, 2009-12-11 04:09
Jeff,
There could be something that I am not aware of, but this appears to be a broadening of the 2002 RMD provisions, which is not authorized. Plans may be more restictive, but cannot broaden RMD provisions such as this which results in the IRS not receiving the tax dollars as quickly as the 2002 provisions specify.
It appears here that the broader provisions available to qualifed look through trusts have been accorded to estates. This could be an improper assumption that those trust provisions apply equally to estates, but they clearly do not.
Permalink Submitted by Jeffrey Holman on Tue, 2009-12-15 18:04
I raised this issue with the compliance group in Citibank’s estate unit. Upon review, they realized their form was in error. They will be correcting this.