inhertied IRA

Submitted by Michael Porfido on Tue, 2020-08-18 16:59

Have a situation where my clients father passed away in March and had an IRA of approx. $1.2M. Then her mother passed away in August. I don’t believe any transfer took place to move the IRA assets into her name before her passing. The four children are the contingent beneficiaries on the fathers IRA.
If we set up Beneficiary IRA’s for the kids, can the transfers go from his IRA to these IRA’s?

Thank you.



Submitted by Alan - IRA critic on Tue, 2020-08-18 20:24

No. Mother inherited his IRA whether she submitted paperwork or not.  Her executor is going to have to file a qualified disclaimer of father’s IRA for the account to bypass mother and go to childen as contingents.  The children can then do direct trustee transfers of their shares to inherited IRAs, and the 10 year rule will apply to those inherited IRA accounts. The current IRA Custodian will need death certs for both father and mother and the disclaimer form.  No distributions should be taken from the inherited IRA until the 4 separate accounts are established.



Submitted by [email protected] on Tue, 2020-08-18 22:24

Would the inherited IRA’s have his name as deceased or hers?



Submitted by Alan - IRA critic on Tue, 2020-08-18 23:36

If the disclaimer is accepted and inherited IRAs are created, they would show the respective child as beneficiary of father since the disclaimer will result in mother being treated as if she pre deceased father. The executor of mother’s estate may well need legal help in drafting the disclaimer. Deadline is 9 months from date of mother’s death. The executor should take no other actions that would be construed as accepting the inherited plan as that could render the disclaimer disqualified. In the meantime, the children will not be able to name their own beneficiaries.



Submitted by David Mertz on Wed, 2020-08-19 02:00

Deadline for mother’s executor to disclaim on behalf of mother is 9 months after father’s date of death.  That would be sometime in December based on father’s March date of death.



Submitted by [email protected] on Wed, 2020-09-16 23:36

Talked with my client again, she is one of the four contingent beneficiaries, and she didn’t know anything about a disclaimer being filed. They did get a letter of testamentary with her and one of her brothers as co-executors. Their rep at Merrill Lynch said they could set up Beneficiay IRA’s and move the assets from her Father’s IRA into four separate accounts. Does this sound correct?  



Submitted by Alan - IRA critic on Thu, 2020-09-17 00:38

  • Because of the effects of the Secure Act, how these beneficiaries inherit the IRA (by disclaimer or through probate of mother’s estate), they will have to distribute their inherited IRAs under the 10 year rule either way. Only the process will differ, since with disclaimer mother’s estate is not involved, and without disclaimer the executors will have to create inherited IRAs by assignment of the account out of the estate. Of course, if mother’s will specified beneficiaries other than the children the IRA goes to those other beneficiaries, but based on Merrill’s comments it appears her will listed the children as beneficiaries.
  • However, if any of the children are disabled or chronically ill, there is another scenario that could play out if father passed prior to his RBD (probably did not). In that case, the disabled child would be an eligible designated beneficiary with a disclaimer filing and could take inherited IRA RMDs over their life expectancy. Please advise if that situation exists.

  



Submitted by [email protected] on Thu, 2020-09-17 18:01

Great. Thank you



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