Minor Inherited IRA
[b]My clients’ mother passed away and inherited IRA’s have been set up for the adult son and for the minor grandson with Dad as custodian.
I am not aware of any rule not allowing a minor to name benficiary on his new account to direct continuation of stretch payments should he pass away, but my broker dealer/ Custodian is requiring the minor’s beneficiary be the minor’s estate.
This seems to make the IRA now an asset subject to probate and complicate unnecessarily the stretch.
Anyone run into this? Of course, when child is adult we can name beneficiary but it does not help the what ifs now.[/b]
Permalink Submitted by Denise Appleby on Thu, 2007-10-25 02:12
Did they give any indication as to why they are taking that position? Is this stipulated in the IRA agreement? An example of an IRA agreement including such a requirement can be seen here http://www.beaconinvest.com/Portals/0/IRA%20Beneficiary%20Form.pdf
Permalink Submitted by Alan Spross on Thu, 2007-10-25 04:22
It would be wise to request a copy of the IRA agreement, as there is likely to be little consistency between IRA custodians on this issue. For example, the Schwab retail agreement does not appear to have the same verbiage as the Schwab Institutional per Denise’s link.
The Vanguard IRA agreement does not distinguish between minors and other beneficiaries when it states “all beneficiaries shall be entitled to name successor beneficiaries to their inherited account”. That would seem to empower an UTMA or other custodian for the minor to name a successor beneficiary on behalf of the minor. It is also possible that state laws factor into this, and must be incorporated into any IRA agreement by reference.
Further research should be done, as naming a successor beneficiary would prevent the need to do a will for a minor at this stage with no other assets other than this IRA.