Death of Beneficiary during “gapP period

Submitted by ShipsnGiggles on Mon, 2013-04-01 16:20

Good Morning

I have an interesting fact pattern that I am receiving conflicting answers.

All help is appreciated

FACTS:
Mom, > 70.5 dies 8/10/2012 Mom did not take her 2012 RMD prior to passing.
Dad > 70.5, subsequently dies 10/27/2012 named as 100% primary beneficiary (on mom’s IRA; children contingent)
Dad did not take any withdrawals
Dad did not name beneficiaries
Dad did not retitle the IRA or make it his own (IRA remains in Mom’s name)

Questions
Who is responsible for the RMD? Husband?
What options do the two adult children have as they were NOT as a beneficiary (as dad dies prior to naming a beneficiary). They would like to “stretch” the account
How should the account be titled?

Thank you,
Brian



Submitted by Alan - IRA critic on Mon, 2013-04-01 17:32

  • Read this article – a qualified disclaimer by Dad’s executors may be the answer, but it must be filed within 9 months of Mom’s death and that deadline is 5/10/2013. This would result in Dad being treated as pre deceasing Mom and the IRA would pass to the children as contingent beneficiaries of Mom’s IRA:  http://www.morningstar.com/advisor/t/42990374/double-deaths-husband-and-wife.htm
  • While the decedent’s 2012 RMD will not disqualify the disclaimer, I think it best to avoid the risk of error in taking distributions before the disclaimer is completed. In any event, under the circumstances the IRS is almost sure to waive the penalty for not completing decedent’s RMD in 2012. Form 5329 should be filed to request the waiver.
  • Don’t worry about re titling the IRA until the disclaimer is completed and children become designated beneficiaries.
  • The childrent would then complete the 2012 RMD, create separate inherited IRA accounts of their own and take their own RMDs for 2013 before 12/31/2013.


Submitted by mk foss on Mon, 2013-04-01 18:14

The 2012 RMD should be taken by the late husband. Apparently it was not withdrawn before 12/31/12 so a waiver request on Form 5329 would be needed AND the missed RMD should be withdrawn and paid to the Dad’s estate.The disclaimer period ends in May of this year for the Mom’s IRA – Dad’s executor may be able to disclaim his interest in the IRA before the deadline. This would allow the children as contingent benefiiciaries to use their own life expectancies for IRA withdrawals. Check with the estate attorney to see what the requirements are for a disclaimer by an executor in your state.If a disclaimer is not possible or not desired, in most cases Dad’s estate would become the beneficiary and RMDs beginning in 2013 would be based on his age when he passed away. The IRA would also be subject to the probate proceeding for his estate – which would have been unnecessary if a beneficiary had been named.



Submitted by ShipsnGiggles on Mon, 2013-04-01 18:41

Alan / MgtThank you!  Your response was extremely helpful.  Brian 



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