Latest PLR: Spouse Was Not a Designated Beneficiary

The Facts:
An IRA owner died before his required beginning date (RBD) and he named a trust as his IRA beneficiary.

The Problems:
The IRA custodian didn’t have any paperwork regarding a trust and nobody had any evidence a trust ever even existed. When there is no designated beneficiary, the IRA custodial agreement default provisions apply. His surviving spouse wanted to treat the IRA as her own, an option only available to spouses who are designated beneficiaries. In this case however, the estate was the default beneficiary.

The Remedies Sought:
The surviving spouse sought court order to permit the IRA custodian to “designate” her as the IRA beneficiary. A state court order was granted but the IRA custodian still said no, insisting that their contractual default provisions apply. She then sought a private letter ruling (PLR).

The Results:
Request DENIED. The IRS agreed with IRA custodian saying, “The court order cannot create a “designated beneficiary” for purposes of Code Sec. 401(a)(9).” To add insult to injury, because the IRA owner died before age 70½, there was no “designated” beneficiary and the estate was the default beneficiary…the 5-year rule applied! This means the entire IRA must be fully distributed within 5 years, eliminating the opportunity for a multi-generational strategy.

The Lessons to Be Learned:
It is critical to make sure your beneficiary forms are up to date and filled out correctly. A mistake like this can cost your loved ones a lot of time and money – not all IRA errors can be fixed.

Source: PLR 201706004

More Updates


The coronavirus-related distribution (CRD) rules for Roth conversions have a gaping hole. An “affected person” (as we have defined in previous blogs), is entitled under the CARES Act to withdraw up to $100,000 from their IRA or workplace retirement plan. A CRD avoids the 10% early distribution penalty for those under 59 1/2, can be

Read More »

Rolling Over an RMD

Like most people’s lives, the retirement world is upside down. This is made evident by a single statement: “Required minimum distributions (RMDs) can be rolled over.” Yes, that is the new normal—at least for this year. RMDs are considered the first money out of an IRA and workplace plan. Typically, these dollars are ineligible to

Read More »

Tapping Into Retirement Accounts If Not Directly Impacted By COVID-19

The recently-­‐enacted Coronavirus Aid, Relief, and  Economic Security Act (CARES  Act) signed by President Trump  on  March  27, 2020, allows  “qualified individuals” to take up  to  $100,000 of  penalty-­‐free IRA and company plan withdrawals during 2020. “Qualified individuals” include those who are (or whose family members are) sickened by the virus or who have virus-­‐related

Read More »
Scroll to Top