Wife dies, was husband’s bene, no contingent, 4 kids, Now?
This summer, a husband dies while taking RMDs from his one IRA- age 84; his wife was sole bene (age 79). She died one week earlier. There was no secondary or cintingent beneficiary. There are four kids (in their 40s and 50s.)
Question: Distributions based on his life? Her life? Or the oldest kid’s life expectancy? (Or can the decendants’ IRA be split into four and each distributed according to their own life?
Permalink Submitted by Alan Spross on Fri, 2007-10-05 23:33
The primary issue here is the default provision in the IRA agreement with respect to the beneficiary. While it is possible that the children are the default designated beneficiares in the agreement, it is much more likely that the husband’s estate will be the beneficiary. If the estate is the non individual beneficiary, and if the children are the sole estate beneficiaries, then the RMD is based on the husband’s remaining life expectancy with the divisor reduced by 1.0 each year. Even if separate accounts are created when the estate closes, the RMD factor will not change and continue to be the same for each account.
Permalink Submitted by John Bergstrom on Fri, 2007-10-05 23:41
That’s what I suspected; there’s no DB other than primary, so it was the logical conclusion, but I wasn’t 100%. My client is in the highest bracket of the four, so I was trying to see how I could possibly save some deferal/tax dollars.
Incidentally, if one of the siblings disclaims, is the general rule a per capita (vs. stirpes) and their share would go to the remaining three?
Permalink Submitted by Alan Spross on Sat, 2007-10-06 03:56
If sibling disclaimed, interest would be divided between other 3. However, if sibling “per stirpes” disclaimed, then the interest would pass to that siblings issue.
Permalink Submitted by Bruce Steiner on Sun, 2007-10-07 04:27
The “general rule” only applies if the Will is silent. Unless the Will provides otherwise (which is unlikely), if a child disclaims, his share goes as if he predeceased his father. In most cases, the Will will say that if a child is deceased (or, in this case, if a child disclaims), his share will go to his children (and if any of them is deceased or disclaims, his/her share goes to his/her children, and so on).
In some states, unless the Will provides otherwise, if two or more children are deceased, their shares are combined and divided equally among their children. In other words, in the example given, if 2 of the children are deceased, and one of them had 1 child and the other of them had 2 children, then in some states, unless the Will provides otherwise, 1/4 of the estate would go to each of the 2 living children, and 1/2 of the estate would be divided equally among the 3 children of the deceased children. That is called “by representation.” In other states, the 1/4 share of the deceased child who had 1 child would go to that one grandchild, and the 1/4 share of the deceased child who had 2 children would be divided equally between the deceased child’s 2 grandchildren. That is called “per stirpes.” Some states that generally use “by representation” where there are 2 or more deceased children use “per stirpes” if 2 children disclaim, so that the disclaimers don’t change the allocation among the branches.
But none of this is likely to be relevant if only 1 child disclaims.
Bruce Steiner, attorney
NYC
also admitted in NJ and FL