Death with no Living Beneficiary

Submitted by Bob Foland on Fri, 2020-07-31 16:41

My 82 year old client died recently. Despite my gentle nagging, she never named new beneficiaries after her husband’s death three years ago. I understand from her daughters that her will divides her estate equally among the three of them, and I know from my conversations with her that she wanted her IRA treated the same way.

I realized that in 32 years at this, I have never had a client die without having named IRA beneficiaries. It seems to me that her will will determine how the IRA is divided, but will her daughters be able to use the five-year rule, or must the IRA be distributed to the estate (and taxed) before the daughters can take possession of the funds in the account? Or, is there any way that they could continue distributions based on the life expectancy of an 82 year old?



Submitted by Alan - IRA critic on Fri, 2020-07-31 17:14

  • The IRA will pass to her estate and become subject to probate of her will. The executor should then be able to assign the inherited IRA out of the estate to the will beneficiaries so that each will have their own inherited IRA. 
  • RMDs are more complex. DId client assume ownership of her inherited IRA, or perhaps did she fail to complete the RMD due in any year as the beneficiary of husband’s IRA?  It makes a considerable difference if she is treated as the owner vs. being treated as a beneficiary, since that determines the RMD requirements for her estate and the beneficiaries thereof.
  • Can I assume that husband also passed after his RBD, and that she passed in 2020 subject to the Secure Act?  Lots of variables here.

  

Submitted by Bruce Steiner on Sat, 2020-08-01 15:12

  • You have to check the default provisions of the IRA agreement.  Some default to the spouse, or if none then the estate.  Some default to the spouse, or if none then the issue, or if none then the estate.  Some default to the estate.
  • Bruce Steiner

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