What happens if the beneficiary of the inherited IRA dies?
Most standard forms require that the IRA be paid in a lump sum to their estate — with all taxes due! It would have been preferable for the beneficiary to have had the right to name a successor beneficiary up front instead. This would have allowed the payout to occur over many years vs. immediately. Remember, the name of the game is typically to delay distributions from an IRA as long as possible to avoid taxes. You should not have to just accept the custodian’s standard form if you can’t adequately handle the issues above. Work with your attorney and develop a customized form that you can attach to the standard form. • What happens if the IRA custodian can’t find your beneficiary designation form when you die? This is a real problem, following all the mergers of brokers, banks, and other custodians. Absent a valid form, the custodian will probably give all the proceeds to your estate – with taxes due soon! So keep a valid copy of your form with your other important documents. Raymond “
