Estate beneficiary

Submitted by ShipsnGiggles on Thu, 2021-03-04 18:58

T-IRA owner, 75, died in 2019 (pre-SECURE)
Estate named 100% primary beneficiary
Husband, 60, sole beneficiary of the estate

I am aware beneficiary can “stretch” using the “ghost” rule – taking RMDs determined using the deceased spouse single life expectancy –

Question:
Here, the spouse is younger (much younger) – Are their strategies where the surviving spouse can use his life expectancy to stretch or even better – do a spousal rollover so RMDs would not have to begin until he is 72? Or is the the “ghost” rule the only option?

Thank you



Submitted by Alan - IRA critic on Thu, 2021-03-04 19:51

There are several IRS PLRs that allow a sole spousal beneficiary to roll over the benefit to their own IRA. This is probably easier if the surviving spouse is also the executor of the estate, but will also require a cooperative IRA custodian to accept the rollover contribution. In this case surviving spouse is over 59.5, so there is no downside to doing the spousal rollover right away. The executor of the estate (whoever) would establish a beneficiary IRA in the name of the estate, and could then assign the inherited IRA out of the estate to the surviving spouse with a cooperative IRA custodian. The surviving spouse could then elect ownership. If the current custodian would not accept assignment from the executor, the inherited IRA might have to be transferred to another custodian. There have been so many favorable PLRs issued, there should be no reason to require the surviving spouse to pursue their own PLR.

Submitted by gautam SHAH on Thu, 2021-03-04 21:49

does custonian have power over beneficiary ? or will or trust?

Submitted by Alan - IRA critic on Fri, 2021-03-05 00:11

The custodian can adhere to their own operating procedures and will also follow the beneficiary clause in the IRA agreement. If the beneficiary feels they cannot work with the custodian, they can transfer the inherited IRA to another custodian. Some custodians still will not cooperate with assignment of the IRA out of the estate even though there is little doubt that the IRS will not have a problem with it. In fact, it is the executor’s duty to transfer estate assets to the estate beneficiary. 

Submitted by ShipsnGiggles on Fri, 2021-03-05 14:16

PLRs “There are several IRS PLRs that allow a sole spousal beneficiary to roll over the benefit to their own IRA.”  Does this mean the executor woul need to recieve a favorable PLR prior to doing a spousal rollover?  Assuming so PLRs are both expensive and time consuming (I’ve read IRS takes 6-9 months to repond)

Submitted by Alan - IRA critic on Fri, 2021-03-05 14:46

Probably much longer than 6-9 months in the current environment. Rough expense estimate perhaps 20k. While PLRs technically only apply to the applicant, and often the findings are inconsistent, in this situation almost all the many PLRs have come down in the surviving spouse’s favor.  The problem is that many custodians do not particularly like inherited IRAs and the possible exposure to estate litigation, and not being cooperative with the executor is a way to have it transferred out or fully distributed with a large tax bill. Pursuing a PLR is a waste of time and money and should be absolutely a last resort. If the surviving spouse has substantial assets elsewhere, he may have some leverage with his firm to accept an inherited IRA transfer, if the current custodian balks. 

Submitted by Bruce Steiner on Sat, 2021-03-06 00:42

See my articles on this in the October 1997 issue of Estate Planning, https://www.kkwc.com/wp-content/uploads/2015/04/AR20050125164755.pdf, and the June 2015 issue of Trusts & Estates:  https://www.kkwc.com/wp-content/uploads/2015/08/IRA-Rollovers-Making-this-option-possible.pdf.

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