Successor Beneficiary of an Inherited IRA

[52626]

1. Harry inherited his Mom’s IRA in 2019 

2. Harry is using the stretch IRA and taking payments based on his life expectancy.

3. Harry is married

In the event of the Harry’s death what happens to his inherited IRA.

1.      Can his wife roll the funds to her IRA?

2.      Can the wife take payments based on her life expectancy?

3.      Is the wife deemed a Designated Beneficiary and eligible to continue taking advantage of  the stretch provisions.

Thanks

[Peter Gulia]

A common reminder among BenefitsLink neighbors is Read The Fabulous Document. While RTFD is often suggest about an employment-based retirement plan, that pointer also can bring information to a question about an Individual Retirement Account. Read the IRA trust, custodial-account, or annuity agreement. Not all IRAs have the same provisions.

[david rigby]

Why does anyone want to assume a "deemed beneficiary"?  You are smart enough to ask these questions, so you should be smart enough to make a real beneficiary designation.

[52626]

All I am asking is if the successor beneficiary of the IRA dies and his wife is his beneficiary, does she get 10-years  for payout or since the original successor was using stretch payment, can she set up her own stretch payments.

From all of my reading she is only eligible for 10 year payment, but I am trying to confirm this.

[Peter Gulia]

If, under the IRA agreement, the IRA beneficiary’s spouse becomes a further designated beneficiary, and

If the IRA agreement sets no distribution provisions beyond those needed to meet Internal Revenue Code § 401(a)(9)’s conditions,

One might consider whether that spouse is or isn’t an eligible designated beneficiary.

That definition has at least two elements:

First, one must be a designated beneficiary, which § 401(a)(9)(E)(i) defines as an “individual designated as a beneficiary by the employee.” Yet, the Treasury department’s interpretation might include a beneficiary designated by a preceding beneficiary (if the IRA agreement allows such a beneficiary designation) and might include a beneficiary determined under the IRA agreement’s default-beneficiary provisions. Proposed 26 C.F.R. § 1.401(a)(9)-4(a)(1)-(4).

Next, if such a designated beneficiary might be an eligible designated beneficiary because of being someone’s spouse, § 401(a)(9)(E)(ii)(I) refers to “the surviving spouse of the employee[.]”

Under the Treasury department’s interpretation:

“[T]he IRA owner is the individual for whom an IRS is originally established by contributions for the benefit of that individual and that individual’s beneficiaries.” Proposed 26 C.F.R. § 1.408-8(a)(2).

“For purposes of applying the required minimum distribution rules . . . , . . . the IRA owner [as defined above] is substituted for the employee.” Proposed 26 C.F.R. § 1.408-8(a)(3).

This is just a starting point; many more defined terms and rules might apply in a particular situation.

Among those, the description of the facts does not say whether Harry continues his mother’s IRA, or made a rollover from that IRA to establish another IRA.

This is not advice to anyone.

[Appleby]

On 7/1/2024 at 3:46 PM, 52626 said:

1. Harry inherited his Mom’s IRA in 2019 

2. Harry is using the stretch IRA and taking payments based on his life expectancy.

3. Harry is married

In the event of the Harry’s death what happens to his inherited IRA.

1.      Can his wife roll the funds to her IRA?

2.      Can the wife take payments based on her life expectancy?

3.      Is the wife deemed a Designated Beneficiary and eligible to continue taking advantage of  the stretch provisions.

Thanks

1. No. Wife cannot roll the funds to her own IRA, because she is not a "spouse" beneficiary
2. No. She must use her husband's life expectancy.
3. No. She is not a designated beneficiary. She must continue distributions over her husband's life expectancy . And, she must fully distribute the inherited IRA no later than 10-years after her husband's death.