Inherited IRA and probate

Submitted by Brent P Stewart on Mon, 2020-10-26 13:48

My client’s 89 year old mother passed away earlier this year. She was the beneficiary of her husband’s Vanguard IRA and my client and his sister are 50/50 secondary beneficiaries. Their father passed away in 2016. Their attorney has advised them that as their mother had not updated the beneficiary designations on the IRA, that the IRA needs to go through probate before it can be transferred to my client and his sister. Is that correct?



Submitted by Alan - IRA critic on Mon, 2020-10-26 19:40

  • Attorney is probably correct, but the IRA agreement beneficiary clause should always be checked. It is possible that it specified the children as default beneficiaries instead of mother’s estate, which would avoid the IRA being a probate asset. I assume the 50-50 secondary beneficiaries were named by the husband, and therefore became non applicable once mother did not disclaim her interest.
  • Once any required probate is completed, mother’s executor should be able to assign the inherited IRA out of the estate to inherited IRAs of client and sister. Rules regarding the beneficiary RMDs of client require additional investigation of the following issues.  1) Did mother fail to take complete beneficiary RMDs in any year 2017-2019, which would have resulted in a default in mother’s status from beneficiary to owner. 2) If so, are client or sister disabled? 3) Any beneficiary default rules also impact client’s RMD requirements.
  • As you can see, if a surviving spouse does not roll over an IRA inherited from spouse, tracing back the RMD for eventual beneficiaries triggers an investigation of all related events following original spouse’s death. 

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