Help choosing beneficiary details for desired outcome
Let’s say an original IRA owner has 2 adult children and 3 adult grandchildren who are named as non-spouse beneficiaries with Fidelity. They will set up their own separate Inherited IRA accounts upon the original owners death. No spouse involved (deceased 2006).
What does the original IRA owner need to do so that if any of them pre-decease her, OR disclaim their share, then that money goes to the remaining beneficiaries, and NOT go to either the estate or anyone down the line (per stirpes?) ?
My guess is that she should name them all as primary beneficiaries without marking them as per stirpes.
Some articles say it would go to the original owner’s estate if a contingent beneficiary isn’t named. But Fidelity says you aren’t suppose to name primary beneficiaries as contingent beneficiaries. I’m confused. Maybe that’s if there’s only one beneficiary?
Thanks for your time. I hope this makes sense.
Permalink Submitted by Alan - IRA critic on Wed, 2023-01-04 01:16
Per stirpes typically does not apply unless specified. Under most (but not all) IRA beneficiary clauses, if a beneficiary pre deceases the owner or disclaims, their share transfers ratably to the remaining primary beneficiaries. Of course, the Fidelity agreement should be examined to make sure this is the case.
Permalink Submitted by John L. on Wed, 2023-01-04 01:31
Thank you Alan. I will look into this with Fidelity. And I learned a new word today (ratably).
Permalink Submitted by John L. on Wed, 2023-01-04 02:34
Hi Alan. I was able to find the section in the Fidelity IRA custodial agreement for a pre-deceased beneficiary. It is then distributed to the other surviving primary beneficiaries equally (not ratably). But the agreement has nothing about a situation of disclaiming. The word “disclaim” isn’t even in the document. Are you aware of any IRA custodians who treat disclaiming differently than pre-deceasing?
Permalink Submitted by Alan - IRA critic on Wed, 2023-01-04 02:57
No. Vanguard’s agreement specifies “proportionately” if the % shares added to 100%, otherwise equally. Proportionately and ratably have the same meaning.
Permalink Submitted by John L. on Wed, 2023-01-04 03:49
Hi Alan. I must not have worded my last question well. The Fidelity IRA custodial agreement addresses how a pre-deceased beneficiary is handled, but it does not address how a disclaimed beneficiary’s assets are handled. The word “disclaim” isn’t even in the document. Are you aware of any IRA custodians who treat disclaimed assets differently than pre-deceased assets? Thanks.