no beneficiary named
Have a prospect. One of 3 children. Father passed in 2020 with an IRA naming the wife as the beneficiary. Wife passed a few years ago and he never updated his beneficiaries. There is a will. children live in different states. one attorney is saying the IRA could by-pass the estate and go directly to the beneficiaries of the will, not the account, and move to bene ira accounts. is this true when they were not the bene’s on the account?
Thank you.
Permalink Submitted by Alan - IRA critic on Fri, 2021-11-19 17:29
The IRA is subject to probate, but can go “indirectly” to the will beneficiaries. While some custodians may resist assignment of the IRA out of the estate to the beneficiaries under the will, this has been approved by the IRS in several letter rulings. The assignment process involves no distributions until the beneficiaries decide to take a distribution. The assignment process does not affect the beneficiary RMDs. If father passed prior to RBD, the 5 year rule applies, and if he passed after the RBD, his remaining life expectancy determines the annual beneficiary RMDs. Because 2020 RMDs were waived, there is no year of death RMD issue, but if father passed after RBD, there is a beneficiary RMD due before year end 2021. They could wait to take the 2021 RMD until after the assignment process to eliminate having the estate take the RMD (if the 5 year rule does not apply), and assume that they could get the penalty waived if they take it late. It’s a pretty safe bet the IRS will waive the penalty with a properly filed 5329.