Jump to content

default beneficiary on an IRA


JulesInCNY

Recommended Posts

my dad passed a few months ago, somewhat unexpectedly after a brief but serious illness, so my siblings and I are dealing with the aftermath of not having everything wrapped up in a neat little ribbon.  he had an IRA that was paying him a small monthly installment to cover his annual RMD.  my mom wanted to transfer the IRA to her own and continue getting the monthly installments, but the custodian is telling us there was no beneficiary designation on file (what?  hard to believe my dad didn't do this!) and the only default is to an Estate, and taxable.  why wouldn't it be to a spouse?  I deal mostly with qualified 401k and retirement plan distributions so an IRA is out of my field of expertise.  we continue to search for old documents at the house, but in the meantime am looking for some guidance.  is this normal for an IRA?  it doesn't make sense that mom will have to get an attorney and set up an estate, go thru probate, have to pay taxes (and legal fees!), etc.   thanks!

Link to comment
Share on other sites

Sorry about your dad's death.

There are lots of ways to avoid probate in most states.  There is the small estate exemption (amount varies by state).  Or if all the property is in a living trust (or enough that the remainder is under the small estate exemption for the relevant state), or if most accounts have transfer on death designations or are held as JTWROS.  A trust is typically needed to avoid probate on real property that it not held JTWROS.  So the IRA could very well bollix things up and force a probate.   I'd ask the custodian for a copy of the IRA document to verify the provision dealing with death and no designated beneficiary.  If the estate is the default, then yeah, probate may be the only option.  Bummer. 

I carry stuff uphill for others who get all the glory.

Link to comment
Share on other sites

I'm sorry about your dad's death and that your mom has to deal with this issue while grieving. Unfortunately, if a beneficiary designation doesn't exist the beneficiary hierarchy is governed by the IRA Agreement. I agree with shERPA that you should ask for a copy of the agreement. If the IRA is passed to the estate, and depending on the size of the estate, you may be able to go through the small estate process and avoid going through probate. If that's the case, your mom, because she is a spouse, could do a rollover of the IRA distribution into her account. Sorry once again, and good luck with this.

Link to comment
Share on other sites

thank you all for the advice.  he did have a will, everything goes to mom (house, contents, bank accounts, etc.).  unfortunately so do all the headaches of updating accounts into her name.  but still looking for old documents...  

Link to comment
Share on other sites

  • 1 month later...

I ran into PLR201936009 that might be of interest. Decedent's estate was the named beneficiary of Decedent's IRA. The surviving spouse was the personal representative and the sole beneficiary of the Decedent's plan. Long story short, IRS treated the plan as having been received by the surviving spouse for purposes of 402(c) and eligible for a rollover to an IRA in her name without being included in gross income.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...