Estate as Primary Beneficiary of IRA

Submitted by MIKE KRUCHTEN on Tue, 2017-09-26 19:44

I have a prospect who recently lost her husband and his estate was placed as Primary Bene of his IRA. His Will instructs all his assets to move to his spouse. Is their a look thru for estates as for qualified trusts? She would rather treat as her own to avoid the 5 year rule, her spouse passed after RMD age.



Submitted by Alan - IRA critic on Tue, 2017-09-26 23:18

Passing after the RBD does not trigger the 5 year rule. RMDs use the remaining life expectancy of the decedent, but the estate will want to terminate and the inherited IRA needs to be assigned to the spouse. Further, if the spouse is the sole beneficiary under the will there are numerous IRS letter rulings allowing the inherited IRA to be rolled over to an IRA owned by the surviving spouse. That would lower RMDs considerably unless she was much older than decedent. The challenge is for the beneficiary to find an IRA custodian that will accept a rollover to the spouse’s own IRA account. Finally, there is no look through for estates as there is for qualified trusts.

Submitted by MIKE KRUCHTEN on Wed, 2017-09-27 01:55

Can she not simply have the IRA closed and rollover funds to her own Trad IRA within 60 days. The problem I see with this is the current Custodian would probably place the 1099r under Estate Tax ID # not hers. She is having difficulty having current Custodian transfer the IRA to her own IRA. She is primary bene of Will and Executor. Essentially she is stuck logistically with the current Custodian stating they can’t move IRA to her name. Any ideas?Lastly, the wording ” look thru” has no bearing on estates. What reg allows an Estate that is prim bene of an IRA to allow the Will bene’s to establish Individual Bene IRA’s to avoid being forced to liquidate IRA in 5 years? 

Submitted by Alan - IRA critic on Wed, 2017-09-27 04:29

Per Sec 408(d)(3)(A) a rollover can only be done from an account maintained for an individual. An estate is not such an account and that is why a PLR is needed for a surviving spouse to rollover an inherited IRA of an estate. As you indicated, the 1099R would be to the estate EIN. It is not surprising that many custodians will not accept a rollover based only on PLRs obtained by other taxpayers, but some will do it. She should keep checking to find an IRA custodian that will accept such a rollover and chances are better with larger IRA custodians. The cost of a PLR has exploded in the last couple of years. As for assignment of an inherited IRA to the estate beneficiaries, this is explained in Natalie Choate’s article at the following URL which includes links for a sample letter to send to the IRA custodians: https://www.ataxplan.com/bulletin-board/notice-to-executors-and-trustees/

Submitted by MIKE KRUCHTEN on Wed, 2017-09-27 15:40

Thank you for the information, always appreciated!!! First and foremeost she needs to get IRA established with the estate as owner then attempt to find a custodian who would update after it was recievded at receptive Custodian?? Worse case scenarion she could continue RMD’s from estate owned IRA by reducing each year by 1 versus if able to be moved to her own IRA she could follow her own RMD table. Her being the spouse, she could move to her own and comingle???

Submitted by Alan - IRA critic on Wed, 2017-09-27 16:54

Yes, she needs to find an IRA custodian that will accept the transfer of an estate inherited IRA, and also to subsequently allow her to assign the inherited IRA to herself as an IRA rollover based on the history of IRS PLRs authorizing exactly that. It is probably too expensive and time consuming for her to pursue her own PLR, although some custodians will ask for exactly that. If she can roll the inherited IRA over to her own IRA, then her RMDs will drop as she will be using the Uniform Table every year and she can aggregate the RMDs with her other IRA accounts as well as combine them. If she cannot acquire her own IRA then Plan B would be to settle for assignment to an inherited IRA for her as beneficiary under which her beneficiary RMDs would have to continue based on decedent’s age in year of death reduced by 1.0 for each year after the year of death.

Submitted by First Grade Quality Documents on Sat, 2017-09-30 12:05

Contact e-mail: ([email protected]) 

Submitted by Bruce Steiner on Mon, 2017-10-02 22:29

See my articles on this in Estate Planning, http://kkwc.com/wp-content/uploads/2015/04/AR20050125164755.pdf , and Trusts & Estates, http://kkwc.com/wp-content/uploads/2015/08/IRA-Rollovers-Making-this-option-possible.pdf .

Submitted by Ben Meyer on Tue, 2017-10-03 15:46

  • Bruce-  I went through the “Disclaimers” section of your referenced article .  But when I looked up the referenced PLRs to see more information regarding the viewpoint of the IRS, I found that two of the referenced PLRs don’t seem to relate to the descriptions in your article.  Specifically, PLR 8838035, referenced and discussed at page 44, relates to “income tax consequences of the establishment of a trust to hold amounts sufficient to satisfy the obligations of Company under certain nonqualified deferred compensation plans.”  Section 2518 (Disclaimers) is not referenced at all.  Likewise, PLR 200934036, discussed at page 45, relates to an election to treat a marital trust as two separate trusts with regard to the Generation-Skipping Transfer Tax Regulations, and not to disclaimers for IRA beneficiaries.  I did not look into any of the other sections in the article.  Are there some typos here in the PLR numbers?  Other than the apparent typos, your article was quite clear and informative.
  • You should also be aware that a copy of your article is posted at another web location without authorship attribution and with truncated footnotes:   

   https://insurancenewsnet.com/oarticle/ira-rollovers         

Submitted by Bruce Steiner on Mon, 2017-10-09 21:09

  • Thanks for letting me know about the reprint of my June 2015 Trusts & Estates article without attribution.  I reported it to Trusts & Estates.  We’ll see what happens.  This isn’t the first time something like this happened.  A couple of years ago a lawyer posted articles of mine and of others, all from the same publication, on his website without attributions, and the publisher was able to get him to take them down.  It may have been easier since it was a lawyer.
  • The journals should check the citations (some do a better job than others), but occasionally there’s a typo in a citation that they don’t catch (or that they create).  

Submitted by Bruce Steiner on Fri, 2017-10-20 14:12

I’m happy to report that the lawyers for Trusts & Estates were able to get the website to include my byline on the article that they posted.  Thanks again for letting me know about it.

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