estate named as IRA Beneficiary

Submitted by Irene Feeley on Thu, 2014-01-09 18:55

Client died and named his estate as beneficiary.assets were transferred to and account titled IRA fbo estate of client. The beneficiary of the estate who is a non spouse wants to take distributions and move the money into their name. can the assets transfer into
the beneficiary’s ira or must the distribution be taxable and moved to a personal account?



Submitted by Alan - IRA critic on Thu, 2014-01-09 19:02

The executor of the estate should be able to have the IRA assigned to the estate beneficiary. This must be done by direct transfer as any distribution taken is not eligible for rollover and will be irrevocably taxable. Executor should resist any suggestion by the IRA custodian to accept a distribution to the estate. Once assigned the beneficiary must use the 5 year rule for RMDs if the client passed prior to his required beginning date. If client passed after that, the beneficiary can use the client’s remaining life expectancy. Beneficiary cannot use his own life expectancy in either case.

Submitted by Irene Feeley on Thu, 2014-01-09 19:09

the executor of the estate is also the beneficiary of the estate. Then please tell me if I am understanding your response. The estate was named as IRA Beneficiary. Upon death the account was renamed IRA for the estate of. It can be retitled to the beneficiary of the estates ira and they need to continue RMD’s using the clients tables?

Submitted by Irene Feeley on Fri, 2014-01-17 19:31

we are being told by miltiple custodians and accountants that because the beneficiary was the estate it cannot be moved to a personal ira. do you have an irs ruling or publication i can refer them to?

Submitted by Irene Feeley on Tue, 2014-01-21 15:55

I need an irs publication or ruling. The custodian is saying the estate ira cannot be retitled to the estate beneficiary under any circumstances. They will not accept the link you gave me since it is an opinion.Thank you1

Submitted by Alan - IRA critic on Thu, 2014-01-09 20:43

Correct. Here is a further explanation with helpful links:  http://www.ataxplan.com/bulletinBoard/ira_providers.cfm

Submitted by Irene Feeley on Thu, 2014-01-09 21:39

thank you very much. You saved me a tremendous amout of time

Submitted by Irene Feeley on Tue, 2014-01-21 14:55

I need an irs publication or ruling. the custodian will not take the link you provided since it is an opinion.

Submitted by Alan - IRA critic on Tue, 2014-01-21 16:18

  • Letter ruling PLR 2012 08039 attached:  http://www.irs.gov/pub/irs-wd/1208039.pdf
  • IRA custodian appears to be inexperienced in this matter. It is also very possible that they know this can be done, but want to avoid the expense of doing this. If they don’t accept this PLR, the IRA will probably need to be transferred to another IRA custodian who is willing to do this.

Submitted by Jose Morales on Tue, 2014-01-21 21:59

To clarify, is the estate beneficiary trying to put this into an inherited IRA listing them as the beneficiary or are they trying to put the funds simply into an IRA in the name of the beneficiary.  Examples:

  1. Joe Smith, Beneficiary for the IRA of Jack Smith
  2. Joe Smith, IRA

From reading your posts above I’m getting the sense that the estate beneficiary wants to put the funds into their own IRA, which is an option only available to a spouse beneficiary.  There is a chance that the current IRA Custodian is assuming the second example is what is being requested rather than the first example, in which case they would be correct in denying the request.

Submitted by BruceM on Tue, 2014-01-21 22:30

When you say “beneficiary of the estate”, is this person or persons named in the will or from some form of pour over provision of the will? If no such person or persons are named, then it would be distributed per the state’s probate code, correct? The executor cannot pick who she wishes to receive the IRA proceeds, correct? Another question: The OP says that this IRA owner named his estate as the beneficiary. Supposing the decedent named his spouse as sole beneficiary and no contingent beneficiary, but the beneficiary spouse predeceases the IRA owner so the owner died with no named beneficiary (intestate). Would the process described in assigning beneficiaries be the same?ThanksBruceM

Submitted by Alan - IRA critic on Tue, 2014-01-21 23:20

  • There are several different paths to getting the IRA asset out of the estate to the eventual beneficiaries. The estate could be the named beneficiary or the default beneficiary under the IRA agreement. The decedent may have left a will or died intestate where the approved estate administrator needed to identity beneficiaries under the order specified by state intestate provisions. In all of these cases, the IRA should be available for assignment to the ultimate beneficiary(s). RMD divisors will be the same, with the IRA passing either under the 5 year rule if owner passed prior to RBD or the remaining non recalculated life expectancy of the decedent if owner passed on or after the RBD. In some cases the estate administrator will be required to first re title the IRA to the estate but some IRA custodians will accept complete documentation from the estate administrator allowing them to bypass placing the IRA under the estate and go directly to inherited IRAs in the name of the ultimate beneficiary. If the IRA custodian balks at this procedure, perhaps offering a hold harmless agreement from the estate to the custodian will make them feel better.
  • I agree that the estate administrator must understand that the IRA cannot be retitled as owner by any non spouse beneficiary, and this might be part of the communication problem.

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