IRA Beneficiary Dies Hours After Original Depositor

[guestdelta]

As the title states, the original IRA depositor (a Florida resident) passed away leaving the assets to his spouse. Hours after, the spouse passes away prior to the assets moving to her IRA. JP Morgan is saying the only option is a distribution to the estate resulting in some hefty tax implications given the size of the IRAs. 

Has anyone dealt with a situation like this? I am sure there are some PLRs out there that help with the tax side of things, but ultimately this is a contractural matter between the estate and the custodian.

[Belgarath]

With the giant caveat that I am neither an attorney nor an IRA expert (I'm a TPA)...you need to check under Florida law. Most (all?) states have some form of "Simultaneous Death" statute, where if both spouses die within a certain amount of time, the spousal beneficiary is treated as not surviving, so it passes to the contingent beneficiaries if named, and to the estate if no named contingent beneficiaries.

Other people on this board are certainly far more expert in these matters, and will probably give you much better answers! 

[guestdelta]

Because there was an identifiable gap between the deaths, I do not believe Florida's law would provide any direction. 

[MoJo]

27 minutes ago, guestdelta said:

Because there was an identifiable gap between the deaths, I do not believe Florida's law would provide any direction. 

I would respectfully disagree.  A "simultaneous death" doesn't mean at the same time or even for the same reason.  In some cases, a "simultaneous death" occurs even if there is a gap of up to 30 days, if the deaths were the result of a common cause (i.e. a car accident that kills one instantly, and the other lingers for weeks before dying of injuries received).  In other cases,  the cause of the second death is irrelevant, if the deaths occur in close proximity (sometime days separated).  The bottom line is, each state has it's own simultaneous death statutes that will define whether or no a simultaneous death exists give the facts - and each determination is very fact specific.

[Peter Gulia]

guestdelta, along with others’ pointers, consider these to ask your lawyer about:

Read the IRA agreement. Many of these include provisions about beneficiary designations, primary and contingent beneficiaries, and default beneficiaries.

Don’t assume Florida law governs. Many IRA agreements include a choice-of-law provision. That choice often is the State a bank, trust company, insurance company, or broker-dealer prefers, or the State some investment funds’ manager or adviser prefers. Some frequent choices are California, Delaware, Massachusetts, and New York. JPMorgan Chase might prefer New York law.

Don’t assume, without reading, that any State’s simultaneous-death statute for decedents’ estates applies. Consider that a State’s statute might not apply to determine the beneficiary under an IRA agreement, a contract right. Consider that an IRA agreement might state its provision about simultaneous deaths and the orders of deaths.

Consider that a simultaneous-death provision might apply only between or among beneficiaries, and might not apply an order of deaths regarding the originating IRA holder’s death.

As MoJo notes, a simultaneous-death time need not be limited to minutes, hours, or days. It might be months. Up to six months is not unusual. See, for example, I.R.C. (26 U.S.C.) § 2056(b)(3).

Consider that a simultaneous-death provision might be irrelevant because the IRA agreement might provide who is a contingent beneficiary and who is a default beneficiary without using any such concept about the order of deaths.

For these and other points, remember a beneficial interest in an IRA is about contract rights.

If the default beneficiary is the personal representative of a decedent’s estate, ask your lawyer about whether one might persuade JPMorgan Chase to pay the applicable decedent’s estate’s takers instead of the personal representative, on satisfactions, releases, and indemnities all around.

Yes, there are some IRS rulings and other nonprecedential guidance your lawyer could read to suggest potential courses of action for a situation in which there is only a default beneficiary.

This is not advice to anyone.

[Roycal]

What the estate(s) needs is a Florida lawyer to provide advice.  Sounds like these estates are large and therefore set up with wills, trusts, and executors.  The executor needs to be involved, and the executor needs to have a lawyer (if not a lawyer)  If you, guestdelta, are an IRA administrator or the like, not an attorney (or maybe a CPA), you should not be messing with this yourself.  Do not rely on what JP Morgan tells you.

[chrd]

Oh my goodness... I saw the headline of this post in my BenefitsLink email newsletter and I almost couldn't believe it....

There's two of us!

I have not read the other comments yet, I absolutely will next, but based on a few specific words you used... hah man oh man. Do I have some things to share with you!

It's almost 3:00am here but I'll follow up more today. Thank you for posting this though. It's especially important to me for quite a few reasons.