distribution from IRA-BDA to spouse
I have a situation that I inherited from another advisor. Clifford dies in 2008 and was 49 when he passed. His ex-wife was the beneficiary on his IRA account. He was divorced in 2007 but the beneficiary was never changed. I have since changed the beneficiary to his current surviving spouse. She wants to do an entire distribution of the account, which is approx. $24,000. I set up an IRA-BDA account thinking that she will not be subject to the premature distribution penalty. She is only 53 years old. Am I correct in my thinking?
Permalink Submitted by Jose Morales on Tue, 2014-01-07 00:52
How is it that you changed the documented beneficiary after the IRA owner died? There have been court cases in which this very situation occurred and the ex-spouse was deemed to be the legitimate IRA Beneficiary. If this ex-spouse did some digging around and discovered that they had a legal claim to the IRA assets this could get very ugly.
Permalink Submitted by Alan - IRA critic on Tue, 2014-01-07 02:44
I agree with urusei2 – but let’s address your question from the current situation back in time. If his current surviving spouse was the actual IRA beneficiary, she could indeed access the funds under a BDA account penalty free. But since his spouse was not the designated beneficiary on the account, how were you able to convince the IRA custodian to reform the beneficiary? While this has been done in the past in rare cases, they all involved going to court and proving that something occurred like a clerical error by the IRA custodian or similar miscarriage of the true intent of the IRA owner. There is no presumption of spousal beneficiary on IRA accounts as there is on qualified plans. So we are very interested in the circumstances that allowed the custodian to feel that the beneficiary should be reformed….
Permalink Submitted by [email protected] on Sun, 2014-01-26 20:50
I spoke incorrectly on this. I did not have the beneficiary changed on the IRA but I set up an IRA BDA for his current surviving spouse and then with the court documents the custodian was able to transfer the assets to her account.