Don’t Let IRA Beneficiary Claims (or the New RMD Rules) Trip You Up
Let’s face it—dealing with IRA beneficiary claims can get complicated. It can be a challenge to navigate complex family situations when sorting out who inherits the IRA assets after an IRA owner passes away. Along with these unpredictable family situations, the IRS finalized major required minimum distribution (RMD) rules in 2024, as well as proposing several new provisions. So now is a good time to take a step back and ask: is your organization ready to handle all of it?
When Beneficiary Claims Get Messy
On paper, beneficiary claims seem simple: someone passes away and your financial organization gives the money to whomever is listed on the beneficiary designation form. But in real life? There are all kinds of curveballs.
Divorce: If the IRA owner’s former spouse is named as a beneficiary under the most recent beneficiary designation, it’s important to determine whether the former spouse’s rights were affected by the divorce. In some states, a beneficiary designation completed before the divorce may be revoked by the subsequent divorce or annulment of marriage.
Community property states: In these states, spouses may be legally entitled to retirement assets unless they waive their right to them. If an IRA owner lists a child or a friend as a beneficiary instead of the spouse, but doesn’t get the right forms signed, this could create problems down the road.
Unusual scenarios: What happens if a beneficiary is under investigation for causing the IRA owner’s death? Or the beneficiary lives in another country? Or there is a beneficiary election form, but the decedent’s will names another person as an IRA beneficiary? These are real-life issues that can slow down the distribution process.
The bottom line? Having a solid process and an experienced team (or trusted partner) in place is key. If you don’t have a legal team, don’t worry, because we do. At Ascensus, our legal team handles hundreds of complex death claims for our Fully-Administered clients each year. Because of our expertise, we know when to flag and escalate claims for further research and processing. Our IRAdirect® Fully-Administered program allows financial organizations to take a “hands-off” approach to processing death claims, tax reporting, and other back-office tasks. Your team members simply input the information into our compliance wizards and we take care of the rest, including communicating with your beneficiaries.
New RMD Rules and the Ascensus 2025 RMD Amendment
In addition to dealing with complicated death claims, your team may also be worrying about the upcoming IRA amendment requirement. In 2024, the IRS released both final and proposed RMD regulations. These regulations include changes to the applicable RMD age and beneficiary distribution options.
While financial organizations are not required to send out updated IRA documents for these new rules until December 31, 2026, or a later date as prescribed by the Treasury Secretary, it can be a good move for organizations to send updated disclosure statements now so your clients aren’t relying on outdated or incomplete information.
Ascensus’ clients can use our updated disclosure statement to amend their existing Traditional, Roth, and SIMPLE IRAs—including inherited Traditional and Roth IRAs.
Although we’re still waiting for the IRS to issue revised IRA model documents, your clients shouldn’t have to wait for their IRA documents to reflect the current rules. Ascensus is here to help: see our previous Solution Center article to learn more about Ascensus’ 2025 disclosure statement amendment.
You Can Count on Ascensus
The recent RMD rule changes, combined with an unusual beneficiary scenario, may cause your team to feel overwhelmed. But with the right tools and support, they can handle even the most tangled family scenarios and keep your clients from running into unnecessary delays or surprises. To learn how Ascensus can help with your beneficiary claims process or amending your IRA documents, contact your sales representative at 800-346-3860 or sales.support@ascensus.com.
