IRA beneficiary, spouse, dies 16 days after original owner who was 87, with no contingent beneficiaries in 2022.

Submitted by Deanna Jones on Wed, 2023-06-14 19:48

What is the best tax advantage way for the heirs to recieve the IRA money? Is it feasible for the heirs to take RMDs over 10 years? If they can take the RMDs over 10 years do they need to use the beneiciarys LE?



Submitted by Alan - IRA critic on Wed, 2023-06-14 20:22

Does this assume that both spouses named the other spouse as beneficiary, both passed after their RBD, and the surviving spouse passed with the pre deceased spouse still designated as beneficiary and no contingent beneficiary?

Submitted by Deanna Jones on Thu, 2023-06-15 15:47

Husband who passed away second had contingent beneficiaries, wife did not.  Both were 86 receiving  RMDs. 

Submitted by Alan - IRA critic on Thu, 2023-06-15 16:25

  • Wife’s IRA – wife passed with husband named as beneficiary. Husband did not name his own beneficiaries before passing soon after wife, so his estate inherited this IRA and the IRA will go according to his will. If no will, then state intestate provisions. His executor may be able to assign this inherited IRA out of the estate to the estate beneficiary(s). The wife’s 2023 RMD must be completed if not completed by wife. Starting in 2024, the deceased husband’s LE based on the age he would have attained in 2024 determines the annual RMDs in years 1-9 of the 10 year rule, however since the 2024 divisor will be 7.1 and decreased by 1.0 for each year after 2024, this inherited IRA will have to be drained in 7 years rather than 10 years. Whoever inherits this IRA through the estate does not affect this RMD schedule.
  • Husband’s IRA – passed second and because wife pre deceased him, the contingent beneficiaries inherit as a designated beneficiaries. One of more could be EDBs that could establish separate inherited IRAs and take beneficiary RMDs over their LE. Non EDBs will have to take annual RMDs in years 1-9 of the 10 year rule period ending in 2033. If separate accounts are not created by 12/31/2024, any EDBs lose EDB status and become subject to the 10 year rule. Beneficiaries must also complete his 2023 year of death RMD if he did not.
  • If a beneficiary inherits from both accounts, they cannot be combined or the RMDs aggregated because the IRAs were held by different decedents. 

Submitted by Deanna Jones on Thu, 2023-06-15 16:37

Thank you.

Submitted by Deanna Jones on Wed, 2023-06-21 16:52

Same couple above, had an IRA Annuity.  Original owner was the wife, with the husband as beneficiary.  The insurance company wants to cut a check for entire balance to the husband’s estate.  Can a new inherited IRA be set up to allow for the 10 year distribution rule? 

Submitted by Alan - IRA critic on Wed, 2023-06-21 18:50

This is the same situation as “Wife’s IRA” posted above, except that if the procedures of the life insurance company require a lump sum distribution, there will be no opportunity for the executor to assign the inherited IRA annuity out of the estate because a distribution will already have been made to the estate. The executor could appeal the distribution but the insurance company probably knows that the assignment request will come next, and they probably are not interested in separate inherited IRAs, which may partially explain their lump sum determination. Does not hurt to ask them however, but I think this is a long shot.

Submitted by Deanna Jones on Wed, 2023-06-21 18:59

Thank you.  Is there any way to do an indirect rollover of the ira annuity funds to the beneficiaries? 

Submitted by Alan - IRA critic on Wed, 2023-06-21 19:20

No, not for non spouse estate beneficiaries. 

Submitted by Deanna Jones on Thu, 2023-06-22 13:17

Thanks for your help.

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