Estate as Beneficiary

Submitted by Richard Ernst on Mon, 2024-03-18 16:30

We recently received a referral.  Upon review of his “End of Year” IRA statement, we noticed that he named his “Estate” as the beneficiary.  He is married ( same wife for the passed 35 years ) with 2 grown daughters. If my notes are correct, we lose the wife’s ability to rollover and or stretch the IRA over her LE.  Even if his intent was to leave the account to his daughters, they lose the 10 year rule because it now has to go by the 5 year rule.  Is there something I am missing?  What, if any, benefit is there to naming an “Estate” as benefactor?      

      



Submitted by Peter Newman on Wed, 2024-03-20 11:33

I believe spouse is an Eligible Designated Beneficiary (if named as beneficiary) and she can take stretch treatment.

Adult children would be subject to the ten year rule. If owner dies before their Required Beginning Date, there are no annual RMDs during 10 year window. If owner dies following their Required Beginning Date (for RMDs), there are RMDs during the 10 year window.

-Peter

Submitted by Clare Fazackerley on Fri, 2024-03-22 00:02

Peter is correct but it is also true that if the IRA goes to the estate, no stretch, no 10 year.  Bad planning.  I’ve seen it happen by accident (beneficiaries died first – too much death, too quickly) but never by design.  This was before 2017, and the 2yo got ~$1MM.

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