Successor Inherited IRA
Is the following a Successor Inherited IRA requiring RMDs to be calculated on the original beneficiary life expectancy instead of the current beneficiary?
An 80 year old man died and his 80 year old wife was the only primary beneficiary on his IRA. There were no contingent beneficiaries. She fell ill soon after his death and was in and out of the hospital until she died 4 months later. She was unable to complete any paperwork to rollover or transfer to her own IRA prior to passing. The IRA custodian distributes the money to “default” beneficiaries since there is no living beneficiary. The default provisions are as follows: 1st to spouse and then to children. Since the spouse is now deceased the money is distributed in Successor Inherited accounts to the children. One of the beneficiary CPAs is claiming this is not a successor beneficiary IRA and therefore RMD will be calculated based on the child’s life expectance. He is claiming that since the wife was less than 10 years different in age we can consider that the account was her own IRA even though paperwork was never completed to make it her own account. What do you believe is correct? Successor Inherited or just inherited?
Permalink Submitted by David Mertz on Tue, 2019-07-02 23:32
The CPA is incorrect. The special rule that automatically makes the wife the owner would only apply if the husband in this case had died before his required beginning date for RMDs, and he died a good number of years after that date. The children are successor beneficiaries to the wife unless the estate of the wife was able to make a timely qualified disclaimer of the inheritance on behalf of the wife and allow the children to be beneficiaries of the husband under the IRA’s default rules, resulting in the children inheriting directly from the husband. As successor beneficiaries the children must continue the distribution schedule that would have been required of the wife as beneficiary had she lived.