IRA custodian requiring probate
A potential client’s father passed away over a year ago. His mother was the primary bene, with himself as the contingent. His mother passed away before a beneficiary claim was filed on her behalf. The son is now trying to process a beneficiary claim for himself, as both the original owner and the primary beneficiary are deceased. The bank who is the IRA custodian is telling him that it can not be distributed to him (the contingent bene) and must pass through probate.
Has anyone ever encountered this situation? What would the reasoning be? Might a custodial agreement require this?
Thanks!
Permalink Submitted by Jose Morales on Wed, 2014-10-08 21:15
What was the timeing between when the father passed away and the wife/mother passed away and what were the relevant ages? You will also want to get your hands on a copy of the IRA agreement and see what the beneficiary language is specifically. If the wife/mother did not make a beneficiary election and it was past the year after the year of death there may have been a default provision that the IRA is automatically assumed by a surviving spouse beneficiary. If there is no such language then it is on them to justify why they are forcing this requirment. If it’s just a situation that they are not comfortable with for some reason the client can ask about having the funds transferred to a more understanding IRA Custodian.
Permalink Submitted by mk foss on Wed, 2014-10-08 23:46
Because the mother was alive when the father passed away, your client’s status as the father’s contingent beneficiary is discarded. No custodian will set up an inherited IRA for the contingent beneficiary with those facts. It sounds like the mother did not live long enough or have the capacity to name her son as beneficiary of her inherited IRA. With most custodian agreements, her estate would be treated as the beneficiary of the IRA. That’s why a probate is being requested. An experienced attorney can make the process as painless as possible but the son will not get the extended stretch based upon his own life expectancy.
Permalink Submitted by Alan - IRA critic on Thu, 2014-10-09 00:46
How about if the beneficiaries of mother’s estate disclaim, if allowable in the applicable state? Might that result in the contingent beneficiary (son) being considered the designated beneficiary? Or would it just trigger intestate laws to determine the beneficiary?
Permalink Submitted by Dennis Prout on Thu, 2014-10-09 12:52
Thanks for the help. This forum is so valuable!
Permalink Submitted by Bruce Steiner on Sun, 2014-10-12 01:07
The executors of the mother’s estate could have disclaimed had they done so within 9 months after the father’s death. In some states, a disclaimer by an executor needs court approval. We’ve obtained court approval for disclaimers by executors in a few cases. The court will likely approve it (if court approval is required) if it doesn’t change the beneficial interests, or if the interested parties consent. An executor is unlikely to disclaim unless either it doesn’t change the beneficial interests, or the interested parties consent. Why didn’t the mother roll the IRA over quickly, or if she died soon after the father, why didn’t her executors disclaim (if appropriate) within 9 months after the father’s death? Bruce Steiner, attorney, NYC, also admitted in NJ and FL.