Estate Listed as Beneficiary on IRA and Roth IRA
An 83 year old cient passed away that had her estate listed as beneficiary on her Traditional and Roth IRA accounts. How are these funds distributed when an entity is primary beneficiary? Are there any ways to bypass the estate and let the spouse take ownership? I’m wondering if there are any PLR’s or rulings that allow for bypassing an estate IRA and paying directly to a spouse, particularly if that spouse is to inherit all in the deceased owners will? Thanks so much!
Permalink Submitted by Alan - IRA critic on Tue, 2024-10-22 12:00
I don’t know why people keep making this same mistake.
However, there are plenty of PLRs allowing a surviving spouse that is the estate beneficiary to rollover a distribution made to the estate to their own IRA. More preferable, if the IRA custodian will cooperate, the executor could assign the inherited IRA out of the estate to an inherited IRA for the spouse, after which the spouse could elect to assume ownership of the inherited IRA. Most IRA custodians know this, but instead act like they don’t because it is easier for them to make a total distribution to the estate. If the custodian in this case asks for PLR numbers, please advise.
With respect to custodian cooperation, if the IRA custodian is a broker they will probably cooperate, but not so much if the custodian is a bank or insurance company. If the custodian will not cooperate with assignment, perhaps the estate inherited IRA could be transferred to a custodian that will.
Most of the cases I have seen where the IRA is left to the estate or the estate is the default beneficiary also tend to be held at a non cooperating custodian.
Note that if the estate was not actually listed as beneficiary, there are a few IRA agreements that default to the surviving spouse (or even children) rather than the estate, but you indicated that the deceased spouse actually named the estate.