Inherited vs Assumed IRA for a 92 year old

[arch57]

My 92-year old father is the sole primary beneficiary of my mother's Vanguard IRA and she recently passed at age 90. In going through the process, we have a choice of assuming vs. inheriting the IRA for my father.

Searching the internet provides generalized information but not specific to our case. The 10-year rule applies to an inherited IRA but at this stage my father's RMD expectancy is 10.8 years, so the distributions would be about the same.

Further my father has congestive heart failure, so his lifespan is likely less than 10 years. I am leaning towards "assuming" the IRA because it seems simpler and would appreciate any comments on folks who faced similar circumstances.

 

[pb4uski]

Sorry for your loss.

Of those two choices, assuming is preferable IMO and that is typical for a spousal beneficiary

Has he considered disclaiming it so it goes to your DM's contingent beneficiaries? Would that be a better choice in your circumstances?

 

[ncbill]

If dad disclaims it is there a contingent named beneficiary?

 

[arch57]

Has he considered disclaiming it so it goes to your DM's contingent beneficiaries? Would that be a better choice in your circumstances?

That would be a good idea but the contingent beneficiary is a Trust that has since been revoked and they didn't update the beneficiary. Thanks!

 

[SecondCor521]

That would be a good idea but the contingent beneficiary is a Trust that has since been revoked and they didn't update the beneficiary. Thanks!

Disclaiming still might work. If there is (effectively) no contingent beneficiary, most custodians then treat the default beneficiary as the estate, and then the terms of the will, most likely the residuary clause, would come into play. (This path would probably result in having to go through probate.)

If disclaiming doesn't work, then I agree it doesn't make much difference and would do whatever seems easiest. Although I think assuming / combining it with his IRA (if he has one) might be better for the next round of beneficiaries (you and your siblings) because I think you might be able to get some longer period of time for you and your siblings to drain her IRA if it is an IRA inherited directly from your father rather than inheriting an inherited IRA from him from your Mom.

(I'm not 100% sure on the rules for when one inherits an inherited IRA, but I think the rule is that one must continue the withdrawals on the first inheritor's (your Dad's in this example) schedule. If your Dad makes it his IRA and then you inherit, you probably get ~10 years from when he passes.)

 

[Wetfly93]

Inherited or TAKE as your own IRA

Having a trust as the beneficiary of an IRA is never a wise move. That being said, your father is best to take his wife’s IRA as his own and to make sure he has the beneficiaries for his IRA updated. This will allow the future beneficiaries to take the IRA as an inherited IRA. There is a 10 year rule and the specifics have not been decided in full yet by the IRS but from what we know there will be mandatory yearly withdrawals and all has to be withdrawn by the 10 th year following the death of the original IRA owner.
You should be able to easily move the IRA from your deceased mother's account to your dad,s IRA quickly. Review how it is invested and make changes if needed once in his account.

 

[Dtail]

Having a trust as the beneficiary of an IRA is never a wise move. That being said, your father is best to take his wife’s IRA as his own and to make sure he has the beneficiaries for his IRA updated. This will allow the future beneficiaries to take the IRA as an inherited IRA. There is a 10 year rule and the specifics have not been decided in full yet by the IRS but from what we know there will be mandatory yearly withdrawals and all has to be withdrawn by the 10 th year following the death of the original IRA owner.
You should be able to easily move the IRA from your deceased mother's account to your dad,s IRA quickly. Review how it is invested and make changes if needed once in his account.

Unless the IRA is in a trust and moves to another trust, then the 5 year lookback rule is not in effect for that transfer.

 

[pb4uski]

^^^ Only applies where you are tryng to use Medicaid LTC planning to put your LTC costs onto your fellow taxpayers rather than use your money to pay for your LTC.