A Safer Retirement and Environment – What We’re Implementing to Help Keep You Safe: READ MORE

Here at Pinnacle Retirement Group, we are adhering to state and local guidelines in order to protect both the health and safety of clients and staff. Keeping our clients and staff safe is our highest priority and we’re taking all appropriate measures to ensure a safe environment. Should you prefer to not meet face-to-face, we are continuing to serve our clients through virtual settings such as Zoom or phone calls.

We look forward to continuing to help individuals and families achieve their ideal retirements.

Pinnacle Retirement Group
(610) 707-9170

CLOSE

 

CHANGING BENEFICIARIES AND THE 10-YEAR PAYOUT RULE: TODAY’S SLOTT REPORT MAILBAG

By Ian Berger, JD
IRA Analyst

Question:

I have a client, age 65, who passed away and left her IRA to her estate. Two nephews and a niece are beneficiaries of the estate.  Is there a way to add beneficiaries after her passing?

I spoke with a financial company, and they said you need some type of court order or ruling to allow this. They indicated that it happens and is allowable, but gave no further details. This would allow us to change the IRA beneficiary to the nephews and niece, and distribution would be over 10 years under the SECURE Act vs. 5 years.

I would appreciate your input as I researched this and came to a dead end.

Steve

Answer:

Hi Steve,

Normally, a beneficiary designation is etched in stone and cannot be changed after the original account holder’s death. However, in certain unusual cases, a court may be able to change the beneficiaries. However, even if that happens, the original named beneficiary is still considered the beneficiary for IRA distribution purposes.

So, it is possible that a court could change the beneficiaries here and allow the IRA to be paid to the nephews and niece. But the estate would still be the beneficiary in applying the IRS payout rules. Since the client died before his required beginning date for RMDs, this means all IRA funds would still have to be paid out to them by December 31 of the 5th anniversary of the client’s death.

Question:

Do adult children who inherited a parent’s Roth IRA in 2020 need to make a required minimum distribution (RMD) each year for the 10 years? Or may they leave it alone and deplete the account at the end of the 10th year? I’ve heard it both ways and would like to know which is correct.

Thank you,

Pam

Answer:

The children are not required to take an RMD each year over the 10-year period. They have total flexibility to take all, some, or none of it over the 10 years. The only requirement is that the entire account be emptied by 12/31/30 (December 31 of the year of the 10th anniversary of the parent’s death). Some of your confusion may be because the IRS originally said annual RMDs were required, but the IRS has since acknowledged that this was a mistake.

https://www.irahelp.com/slottreport/changing-beneficiaries-and-10-year-payout-rule-today%E2%80%99s-slott-report-mailbag

Ready To Take

THE NEXT STEP?

For more information about any of our products and services, schedule a meeting today.

Or give us a call at (610) 707-9170