I inherited an IRA am a non-spouse and he didn’t take his RMD..

Submitted by Carol Gesior on Tue, 2014-12-16 16:44

My boyfriend made me his beneficiary of his IRA and ROTH IRA. He passed in July and was 80. He did not take his RMD this year. I am 55 and I have not touched anything. His children (4 adults) want me to waive the rights to the IRA in exchange for my home of 27 years which they now own since there was no will,I guess. However, here it is 12/16 and they have not gotten back to me as to whether they for sure want to do this exchange. What are the consequences? All I want is my home. I don’t want to lose 50% of the RMD, but I don’t want to lose my home either or the opportunity to own it. It was mortgage free.



Submitted by Alan - IRA critic on Tue, 2014-12-16 17:15

You need to retain an attorney if you wish to pursue this “exchange of assets” and it will take some time even if the children are all of one mind, and that is unlikely. You would have to file a qualified disclaimer of the IRA before the disclaimer deadline, and then the IRA beneficiary would likely become his estate unless the IRA had the children shown as contingent beneficiaries. His children would have to take RMDs using their father’s remaining life expectancy if this happened and they also would be responsible for taking his year of death RMD. Under the circumstances, either you (If you retain the IRA) or the children if you disclaim can likely get the IRS to waive the penalty if the year of death RMD is not distributed until 2015. Note that if the Roth goes to his estate, he is treated as passing PRIOR TO the RBD for the Roth only, and the 5 year rule would apply for Roth RMDs. If you retained the IRAs as non spouse inherited IRAs, your RMDs would be based on your own single life expectancy using your age as of 12/31/2015. Finally, if you want to take his 2014 year of death TIRA RMD before year end, you can still disclaim by the deadline as long as you do not withdraw any more than his year of death RMD.

Submitted by Carol Gesior on Tue, 2014-12-16 18:21

If I would be able to do this?  As far as the ROTH is concerned, he had rolled over funds into the ROTH 4 1/2 years prior to his death.  Are there any rules regarding this too?  He left such a mess.  There are no contingent beneficiaries, so I guess the Estate would then get the IRA and ROTH IRA? The estate is in Probate as of August 2014 and he passed away July 14, 2014.

Submitted by Alan - IRA critic on Tue, 2014-12-16 18:50

  • He may have done a 2010 conversion. If so, the 5 year holding period is completed on 1/1/2015. The Roth would then be fully qualified and all future distributions will be tax free regardless of who ends up with the Roth IRA. That should be taken in consideration in determining the relative IRA value as a tax free Roth is worth more after taxes than a TIRA for which taxes have not yet been paid.
  • If you disclaim, his estate will probably receive the IRA funds, but this should be confirmed by checking the IRA agreement and/or asking the IRA custodian if that is the case. Some IRA agreements would make the children the default beneficiaries instead of the estate when the decedent is single at death. Good chance then if you disclaim the IRAs in exchange for the house, the IRAs will be added to his probate estate.
  • Note that if you disclaim, the form must be filed with the IRA custodian no later than 4/14/2015 since 9 months from the date of death is the disclaimer deadline.  http://www.nysscpa.org/cpajournal/1996/0996/features/Qualified.htm

Submitted by Carol Gesior on Tue, 2014-12-16 19:28

This is great information.  YOu have been very he;pful.  I seemed to be getting different information from different accountant.  Thank you so much!!

Submitted by Ed Mangan on Thu, 2014-12-18 17:24

a lot to think about with that. is the value of the IRAs the equivalent of the house? are you sure he did not leave a will? then was there enough IRA money that now by your self do you want to down size. the tax free Roth might be a good down payment on your next place. a good lawyer or accountant might be a good help to figure that out. you do know IRA monies are paid on the spot, meaning they go straight to you and not through probate….if you have that in your state. you need to just show up with a legal copy of the death certificatee to claim the IRAs. how long would it take for you to get the house free and clear into your name? again a lawyer and the accountant to be sure it is done legally.        you think the kids have the home in their name……..   I would have to study this more. owning the IRAs is a sure thing.

Submitted by Carol Gesior on Thu, 2014-12-18 23:39

They won’t tell me what the appraisor has said it is worth, but I did have a realtor give me a general idea.  The IRA and ROTH would be very close to what my realtor’s thoughts.  I don’t know if the appraisor has the same numbers though.  So far, this is not being shared.  They said they don’t have it yet even though the guy came before Thanksgiving.

Submitted by Ed Mangan on Thu, 2014-12-18 17:52

if there was a will and his kids were given the house and the will instructed them to let you live out your years there would the kids tell you?

Submitted by Carol Gesior on Thu, 2014-12-18 23:36

Maybe not.  But there was no Legal Will that I know of.  The Probate was filed Intestate.  He did tell me what you stated, but I have nothing in writing.  Although there are probably 10 people that have nothing to gain that he also told this to. But we (Illinois) is a not a common law state and I can’t find anything in writing.  He may have had something at his business or given something to his oldest daughter, but they destroyed it.

Submitted by Ed Mangan on Thu, 2014-12-18 17:57

something like that may mean they need to maintain the house ETC. including the property taxes. it may be they have a lawyer trying to coax you out of the house…..or the IRA funds.            think about that…..                                             if you abandon the house they might get it…..a scare tactic?

Submitted by Alan - IRA critic on Thu, 2014-12-18 20:20

Due to all these variables and the overall situation, she needs to retain an experienced estate attorney.

Submitted by Carol Gesior on Thu, 2014-12-18 23:37

However, they warned me that if I hire an attorney that the deal (of keeping my home and belongings that we collected over the 27 years of vacations) will all be theirs. 

Submitted by David Mertz on Fri, 2014-12-19 13:57

This sounds illegal and you could end up with nothing if you don’t proceed carefully.  It would be careless to do a disclaimer without an attorney.  I don’t think that a disclaimer would be a qualfied disclaimer if you receive the house in exchange (see example 2 in http://www.law.cornell.edu/cfr/text/26/25.2518-2).  You could end up with them having the house, the belongings and the IRA.  Otherwise, you might end up with the house and the belonings, but also a tax bill for the value of the IRA; this would be no different than cashing out the IRA, paying the tax on the distribution, then buying the house and belonings from the estate or the children (or financing the purchase and using regular distributions from the IRA to pay the mortgage).

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