IRAs neither claimed nor disclaimed in Ohio
I have a situation in Ohio where the primary beneficiary neither claimed nor disclaimed the IRA.
A married couple had a long standing relationship with a brokerage and a dedicated financial advisor. The husband was the IRA owner and died in December 2011. When he died, he had just turned 72. He had indicated the wife as the primary beneficiary and the daughter as the alternate beneficiary.
The financial advisor tried many times to get the wife to sign the paperwork for the IRA, but she would not. So she neither claimed, nor disclaimed in writing. An RMD was required but the brokerage could not and did not distribute.
The wife died in November 2013 with the paperwork unsigned. The alternate beneficary is the couple’s daughter.
Does the IRA go to the mother’s estate or to the daughter?
Permalink Submitted by Alan - IRA critic on Fri, 2014-03-21 17:08
If a qualified disclaimer was not filed by the deadline, the IRA is inherited by the primary beneficiary and not the contingent beneficiary. The default ownership rule will also come into play here, that is when a sole spousal beneficiary fails to take the RMD required as beneficiary they default to ownership of the IRA. Spouse therefore owned this IRA upon her death and since she obviously could not have named her own beneficiary for this IRA, her estate would be the default beneficiary under most IRA agreements. However, the specific IRA agreement needs to be checked to verify what the default provision is. It is possible that it names the children if there is no surviving spouse, but it is more likely to be the estate. Surviving spouse’s will would then determine where the IRA goes, and if daughter was the will beneficiary her RMDs would be based on the remaining life expectancy of the wife assuming wife passed after her RBD. This is a general analysis, and there is a chance that Ohio addresses this differently. If state laws require it, the IRA agreement must conform to the state requirements.
Permalink Submitted by Jose Morales on Fri, 2014-03-21 17:15
By not disclaiming, the spouse became the designated beneficiary on September 30th of the year following the year of the IRA owner’s death whether she made any affirmative elections or not. Was the 2011 RMD taken? If not the excess accumulation penalty would have been applied when the spouse filed their taxes for 2011. If the spouse failed to take an RMD as a beneficiary in 2012 the IRA would have been considered as treated as the spouses own IRA. Was the spouse also over 70 1/2 and required to take their own RMD in 2012? If yes, then they would have owed an excess accumulation penalty for not taking their own RMD in 2012. With no affirmatively chosen beneficiary from the spouse you may have to rely on the default beneficiary election on your original IRA Agreement as it would have applied had the spouse taken action to treat the account as their own, which may make the beneficiary the estate of the spouse.