pass through IRA beneficiary designation
My father passed away recently with essentially no estate other than 250+k in an IRA. According to the IRA custodian, my father never designated a beneficiary on his IRA, which was a rollover from his 401k in approximately 1993/94. His lack of designation is curious because on every other plan/asset he has (including 3 small life insurance policies) he designated my brother and I as the the sole beneficiaries (50/50). His will makes me executor and also provides for a 50/50 distribution of all assets.
Additionally, my father has a pending lawsuit against him and I am the attorney representing him in the case. If we have to go to probate, the estate could be joined in the suit and the assets in the IRA will be tied up and potentially be used to satisfy a judgment.
Now, just tonight I discovered a “beneficiary designation for retirement savings plan” from his old employer that he executed in 1993. I believe the funds from this plan were used to create his rollover IRA. So, my question is, is there some way, either through charm or legal action, to have my brother and I listed as beneficiaries on his IRA on the basis that that is his clear intent represented by the designation in his retirement plan (and his other policies and his will).
It could cost my brother and I a significant amount of time, effort, and expense if we have to go through probate and I would appreciate it if someone could highlight some law/statue or other source where beneficiary designations from one plan carry over when those funds are “rolled over” and no new beneficiary is designated.
Permalink Submitted by Aryn Sands on Wed, 2010-04-07 16:54
I would go to the custodian and see if they have set up a default designation. Most custodians have set up default designations in the last 10 years but they may deny the designation since he signed the adoption paperwork so long ago. You need to beat up the legal department at the custodian FIRST before you do anything else.
*A default beneficiary designation is found in the IRA adoption documents when you set up the account. Some custodians have sent “Opt out” notices for older IRA’s. It basically says that if you don’t designate a beneficiary than it goes to spouse and then children by default. However, if the person put “ESTATE” in the IRA application, you may be out of luck.*
If this doesn’t rectify the situation you may want to get the broker involved if there is one. This is one of THEIR jobs. The paperwork was probably blank. I hate sayign this, but you may want to ask them for reimbursement of fees if you think they were negligent…perhaps to the custodian too. This situation is the reason the industry developed default designations.
I think that given the size of the account, it would cost MORE to get a probate judge to decide what your father’s intent was on the deisgnation than going through with things the way they are. You should ask a lawyer in your area who does estate planning for sure. It will depend on your states probate fees and the lawsuit situation. You are asking probate question not an IRS decision so the statute depends on where you are in the country. I would research the probate code in the state that is applicable.