IRA BDA for an Estate

Submitted by Kevin O'Hearn on Tue, 2025-05-06 14:48

Hello,

I have a client that passed away in 2018 at age 79 and his wife was the primary 100% beneficiary and their 2 child were the contingent beneficiaries (50/50). The wife never took possession of the funds and passed in 2024. Our custodian would allow for a IRA Estate BDA for the mother or with the correct paperwork they would allow to by pass the estate BDA and open up IRA BDA for the 2 children since they were listed as contingent beneficiaries and are the beneficiaries of the estate.

Under either scenario would they both be under the 10 year window and an RMD would be required in years 1 thru 9 based on the mother’s life expectancy.

Thank you. This would have been cleaner is actions were taken in 2019.

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Permalink Submitted by Alan - IRA critic on Tue, 2025-05-06 16:51

Starting at the beginning, husband passed after RBD, and wife not having the IRA retitled does not affect the RMD rules. Since wife did not pre decease husband, the contingent beneficiaries he named were no longer effective after his death. What matters is that the children are the estate beneficiaries. Wife also failed to take a beneficiary RMD in 2019 and therefore defaulted to ownership status of the IRA at the end of 2019. Her estate is therefore a named beneficiary but not a successor beneficiary, and I will assume that she passed after her RBD. As such the inherited IRAs for the children are subject to annual RMDs using the wife’s remaining LE. The 10 year rule does not apply to estate beneficiaries. The estate (or children after assignment out of the estate) is also responsible for completing her 2024 RMD and the deadline for that is 12/31/2025.

Wife’s age in 2024 year of death will determine the divisors that apply to the children for their beneficiary RMDs. If she was under 80, the inherited IRAs will last a little longer than 10 years.

However, if wife passed prior to her RBD, the 5 year rule applies with no annual RMDs required.