Which estate would get the IRA when a non-spouse beneficiary inherits an IRA account but dies before the money is put in her name with no contingent beneficiaries can be complicated, says nj.com in the recent article entitled “Who gets this inherited IRA after the beneficiary dies?”
A decedent usually transfers IRAs 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 non-designated beneficiaries to determine 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 they 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, the financial institution’s IRA plan documents would determine the beneficiary when no one is named. These rules usually say that it goes to the spouse or the estate of the deceased beneficiary.
Reference: nj.com (June 1, 2021) “Who gets this inherited IRA after the beneficiary dies?”