Question: Hi, you have a question about IRA. My father left his IRA to his four children. Before we signed the papers to get the children’s share, one sibling died. He was married, will his wife get a share of siblings? His name is nowhere in the IRA. What will happen to the siblings who have died? Thanks
A. My condolences to you and your family on the death of your father.
The distribution of IRA accounts is determined by the beneficiary surname. These transfers occur without probate and without consideration of other documents such as wills or trusts. Because your sibling was alive when your father died, it became his share after your father died. Share with your siblings so part of your siblings’ property is now dead.
If the paperwork had been signed before your sibling died, he or she would probably have established an inherited IRA and named his or her beneficiaries. Those beneficiaries will now receive assets based on the beneficiary title filed for your successor IRA.
However, since no paperwork has been processed, then your brother’s estate depends on what the documents say. If he has the will, he will tell who gets it and when. This will require probate. The will will probably name his wife’s beneficiary and if so, he will receive funding.
If there is no will, the underlying law of his state applies. Distributions under the underlying law are facilitated through the probate process. Most of the underlying laws favor spouses over children or other relatives.
Now, if your brother dies before your father dies, the beneficiary form in your father’s IRA determines who gets your siblings’ share and it doesn’t matter if your siblings want it or not. Anyone who shares your brother will nominate your father as a potential beneficiary.
It is also possible that your father’s privileged position may include a “per capita” or “per se” option. These selections will only apply if a beneficiary pre-defrauds the IRA owner. Per capita (per capita) selection means the IRA will be divided into three beneficiaries surviving from your parents. Each strip (per branch) will mean that one-fourth of your deceased siblings go to the heirs of those siblings.
Helps to demonstrate the importance of properly nominating beneficiaries in various situations such as IRA, Roth IRA, Retirement Account, Insurance Policy and other accounts providing Beneficiary Title. Put some thought into it and plan ahead. Don’t just slap one or two names on a form or fail to fill out a worse beneficiary rank form.
If you have questions for Dan, please Email him With “MarketWatch Q&A” on the subject line.
Dan Moyesand Moisand Fitzgerald Tamayo is a financial planner who serves clients across the country but with offices in Orlando, Melbourne and Tampa Florida. His comments are for informational purposes only and are not a substitute for personal advice. Consult your advisor about what is best for you. Some questions are edited for brevity.