IRA with No Named Beneficiary
We have a mother who passed away last year, had 4 daughters, and did not have a named beneficiary on her IRA account. The beneficiary therefore went to the Estate of Mothers’ name. The investment firm has told the four daughters that they have two options:
#1 – Take a full lump sum distribution from the estate (fully taxable).
#2 – Defer and take a distributions for the next 15 years.
We would like to have go to each in an Inherited IRA.
My question is… Is there any IRS code that would allow the IRA in the Estate to be split up into four separate Inherited IRAs for each of the four children?
Thank you!
Permalink Submitted by Alan - IRA critic on Fri, 2016-11-11 20:06
The IRS allows this, but it is not clearly stated in the code. Here is an article by IRA expert Natalie Choate that explains this as well as some of the options and sample forms to get this done. Note that mother apparently passed after her RBD and therefore the 5 year rule does not apply. 15 years is mother’s remaining life expectancy. Once the IRA is assigned out of the estate to the estate beneficiaries and they set up their own inherited IRA accounts, they should be able to take RMDs over the 15 years OR accelerate the distributions. One might want to take a lump sum, the other take out more than the annual RMD, and yet another stretch it for the full 15 years. They can each make their own choice. https://www.ataxplan.com/bulletin-board/notice-to-executors-and-trustees/
Permalink Submitted by Ben Meyer on Sun, 2016-11-13 17:40
A further advantage of splitting the IRA into separate inherited IRA accounts is that the each beneficiary will then be able to make a successor beneficiary designation of his or her own choice.