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Blog Articles: Who Receives an Inherited IRA after the Beneficiary Passes?

Who Receives an Inherited IRA after the Beneficiary Passes?
What happens if a non-spouse beneficiary inherits an IRA account but dies before the money is put in her name. There were no contingent beneficiaries. Which estate would get the IRA?

Who receives an inherited IRA after the beneficiary passes but before the money is put in her name with no contingent beneficiaries?  It can be complicated, says nj.com in the recent article entitled “Who gets this inherited IRA after the beneficiary dies?”

IRAs are usually transferred by a decedent through a beneficiary designation form.

As a review, a designated beneficiary is an individual who inherits an asset like the balance of an IRA after the death of the asset’s owner. The Setting Every Community Up for Retirement Enhancement (SECURE) Act has restricted the rules for designated beneficiaries for required withdrawals from inherited retirement accounts.

Under the SECURE Act, a designated beneficiary is a person named as a beneficiary on a retirement account and who does not fall into one of five categories of individuals classified as an eligible designated beneficiary. The designated beneficiary must be a living person. While estates, most trusts, and charities can inherit retirement assets, they are considered to be a non-designated beneficiary for the purposes of determining required withdrawals.

Provided there is a named beneficiary, and the named beneficiary survived the owner of the IRA account, the named beneficiary inherits the account.

The executor or administrator of the beneficiary’s estate would be entitled to open an inherited IRA for the beneficiary because the beneficiary did not have the opportunity to open it before he or she passed away.

Next is the question of who would inherit the account from the named beneficiary because she died before naming her own beneficiary.

In that instance, who receives an inherited IRA after the beneficiary passes is most likely going to be decided by the financial institution’s IRA plan documents.  These rules usually say that it goes to the spouse or the estate of the deceased beneficiary.

Distributing assets from an estate sure can be a messy business!  That is why you need to be careful in creating an estate plan according to Beck & Lenox.  Having one will not solve all potential problems, but it can sure eliminate most of them.

Reference: nj.com (June 1, 2021) “Who gets this inherited IRA after the beneficiary dies?”

 

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