[WSBAPT] Default Beneficiary of IRA

[Michael Geoghegan]

Hi All,

Here's my question:
Where the Primary Beneficiary of an IRA does not survive the decedent, can the company managing the IRA use defaults to determined the contingent beneficiary or must the IRA revert to an "Inherited IRA in the name of the Estate"?

I am working on an estate where the decedent did not properly name contingent beneficiaries to his tax deferred retirement accounts.

Decedent left an IRA with just shy of $1M. Primary beneficiary is the testamentary "Marital Trust," established l only if spouse survives him. Spouse did not survive him so the Marital Trust does not exist.

There is no Contingent Beneficiary named to receive the IRA.

I consulted Natalie Choate's book and determined that the the IRA account should be treated as "No Beneficiary" and default to an Inherited IRA in the name of the Estate.

Today I learned that the custodian of the IRA account has its own internal default rules if Primary Beneficiary is not available to inherit the IRA -- 100% to spouse or 100% divided among then-living children if spouse is not alive.  This is not in line with the inheritance scheme of decedent's estate.  Is there a legal basis for such a policy?

(The after the Marital Trust, the will establishes a "Family Trust" to manage tax deferred retirement funds, RMDs to be split 5 ways. I infer the intent of the Family Trust was to prevent decedent's only child from immediately cashing out an Inherited IRA.)

-Michael



Michael Geoghegan
Northwest Strategy and Planning, PLLC
t: 206.353.5592
e: michael at nwstrategyandplanning.com

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