Podcast Episode - Ask Suze & KT Anything: Inherited IRAs


IRA, Retirement


August 20, 2023

Listen to Podcast Episode:

This special Sunday edition of Ask KT & Suze Anything, is all about inherited IRAs.  Since the rules for inherited IRAs have changed dramatically, it's important for you to know how to apply those rules so you can access the IRA you inherit.


Podcast Transcript:

00:00:00

Intro/Outro: All right, Suze KT. Are you ready for today's podcast?

00:00:03

Intro/Outro: Yeah, of course, we're ready because we are unstoppable. Yeah, baby.

00:00:12

Intro/Outro: Music (in).

00:00:33

Suze: August 20th, 2023.

00:00:37

KT: Goal!! Do they know why I'm saying Goooal?

00:00:45

Suze: I'm sure they do, KT. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen today rather than Suze School because I switch things up.

00:00:58

Suze: I did Suze school on Thursday day without, without her, but I wanted her here today because a week ago I said that I would do Suze School today on Inherited IRAs on designated beneficiaries. Should they be contingent primary and all these things? Which is very, very complicated. You got that right. Right.

00:01:23

Suze: I asked KT to go through all the emails and look for questions that had anything to do with inherited IRAs with primary beneficiaries, contingent beneficiaries and questions that she herself on no level, understood what they were asking. but because this is a complicated

00:01:49

Suze: answer to questions like this again, just so you know, an inherited IRA is an IRA that somebody has died and they've left it to you and therefore you have inherited it. And the laws of how you withdraw money

00:02:08

Suze: have totally changed over the years now. So you have to know what those rules are. So, Miss Travis, ask me your questions that you picked out.

00:02:21

KT: I have quite a few here. So I don't know if we're going to do rapid fire, but some of these are real doozies. I could not, I couldn't even understand what it meant.

00:02:29

Suze: That's why you chose them.

00:02:31

KT: Ok. First one's from Joie.

00:02:33

KT: I have an annuity in my IRA rollover that I'm not ready to annuity until next year. So at that time, all of my income needs would be covered. I like that, Suze, I'm turning 73 next year just like you. So my question is, will those annuity payments of $500 a month count towards my RMDs?

00:03:02

KT: And then she says I have 100,000 in investments and 100,000 in the annuity.

00:03:08

Suze: Could you have picked a more complicated?

00:03:11

KT: This is Suze... I got news for you and everyone listening. This one is easy compared to what's to come. So stay tuned.

00:03:21

Suze: You're really gonna stay tuned because that question I will answer next Sunday on Suze School.

00:03:30

Suze: Because KT that is one of the more complicated questions to understand of any question you could possibly ask. So we now know what Suze's school is going to be next Sunday. Next question.

00:03:47

KT: Next question is from Lily. My dad had an Ira, sorry, it wasn't a Roth Ira. He didn't listen to your podcast, Suze. However, he named my mom as the primary beneficiary.

00:04:01

KT: Oh, this is sad. He and my mom recently both died in a car crash hit by a drunk driver. My dad did not name a contingent beneficiary.

00:04:13

KT: So, Suze, now what happens? There are three of us kids remaining and we are heartbroken.

00:04:20

KT: So this is a real what ifs of life from Lily, everybody? What what happens now, Suze?

00:04:26

Suze: So Lily, I'm so first of all, so, so sorry for your loss, right? And second of all, when there isn't a contingent beneficiary and the primary beneficiary has died along in this case with the owner of the retirement account.

00:04:45

Suze: Now, what's going to happen is it will be dictated by your parents wills or trusts. The sad part about that is normally a retirement account that names a beneficiary

00:05:02

Suze: bypasses probate. It just automatically goes to you when there is no beneficiary named or the beneficiary is no longer alive. It then has to go through probate designated by the wishes of the will. If for whatever reason, they didn't have wills,

00:05:25

Suze: then it goes into something called intestate succession where the rules of the state that they lived in will govern how that money is distributed and to whom normally it would be to the spouse,

00:05:43

Suze: possibly the spouse and the Children. But in this case, it probably all will go to the three of you and you will divide it, but you are gonna have to go through probate again. Our total condolences to you and your family.

00:06:00

KT: You know, when I read this, when Suze, it reminded me of you and me when we do the will and trust and, and just so that everyone that's listening knows Suze goes through hoops when she does this trust and we change it all the time. But she's always asking me, well, KT what if something happened to this sister and then what, you know, she goes through so many iterations of the questions and now I get it.

00:06:26

KT: I mean, this is just so sad. The what ifs so next question is from Jeffrey. My mom left her 403 B at work to my brother as a primary beneficiary and me as the contingent with verbal instructions. That's the problem with this one, verbal instructions. It was to be split 50 50. She was concerned for my brother and I that we don't get along and we never did.

00:06:54

KT: So now my mom has died and my brother said he legally does not have to give me any of the money. But Suze, I was the contingent beneficiary. So how can he do that?

00:07:08

Suze: Well, here's what you need to know that as long

00:07:13

Suze: as the primary beneficiary is alive and kicking,

00:07:20

Suze: you can't do anything about it. So once somebody has died and the money now goes, or the retirement account now goes down to the primary beneficiary. The contingent beneficiary is just stuck. It's over. You have no power in this situation whatsoever. What were you gonna say?

00:07:44

KT: The, the, my, my big red flag was she said, or he said with verbal instructions, is there a way that you could write an instruction?

00:07:54

Suze: Yeah, they mom could have left both brothers as primary beneficiaries to be divided equally between them.

00:08:06

KT: So you can name two people as a primary?

00:08:10

Suze: Yes. But, but or you leave it to your trust where the trust has the two primary beneficiaries as the two of you. But once a death has happened and there's only one primary beneficiary, then a contingent beneficiary. It means squat in this situation. It only would have meant something. If the brother had died,

00:08:36

Suze: then mommy had died, then it would have gone to Jeffrey.

00:08:42

KT: Ok. Next question is from Laura. My mom was the primary beneficiary of my granny's IRA. My granny died a while ago now, but my mom was too heartbroken to do anything with it. I know she felt listen to this. She felt if she left it, her mom, meaning granny would have been happy with her.

00:09:06

KT: My goodness. A month ago, my mom died very quickly after they found she had cancer. Now who gets the money?

00:09:16

Suze: So that it's almost the same situation as what I just said. Your granny's Ira now becomes what's known as an inherited Ira with no beneficiary

00:09:30

Suze: and just like Lily's question, KT it will now go according to Granny's will and through probate again. If granny didn't have a will or they can't find the will because it's been a while now, then it will go through intestate succession according to the state that they live in as to where that money is to go. Let me just say something before you go on.

00:09:57

Suze: It is essential. Absolutely essential that if somebody dies and they leave you an IRA. So therefore you are a 401k, whatever it is and you have inherited it, you have to immediately take it over, set up an inherited account for yourselves and follow the rules. Otherwise you may find yourself in a situation like these people have found themselves. Go on KT.

00:10:26

KT: How do you do that?

00:10:27

Suze: What do you mean, how do you do that?

00:10:29

KT: How do you do that?

00:10:30

Suze: You set up an account at a brokerage firm or wherever you want it, you then roll it into it that it will be inherited. You will show the death certificates and everything of the person who left it to you and you just set it up that way.

00:10:46

KT: All right. Next question is from Tom. I know how to set mine up. It has a whole lot of money. I know. I, I'm thinking like I knew you were. I don't know how to do that.

00:10:56

Suze: Well, KT, in our situation, I'm so sorry to say this. Everybody but Barbara and everybody will take care of you. I've put in place

00:11:06

Suze: people to make sure that KT is OK.

00:11:09

KT: If something happens to me, the majority of people don't even know how to find Netflix, but don't be so proud of that. The, the, you know, I say Suze find us a movie. What do you want to see? Netflix's it? And there it is, right?

00:11:27

Suze: But

00:11:27

Suze: majority of people KT don't have that luxury. So they really need to know how to do it. And the truth is I got news for you. You should know how to do these things. You should never KT be dependent on anybody to do anything.

00:11:44

KT: I would figure it out. I mean, I feel very confident that I can do it and I would figure it out.

00:11:49

KT: But a lot of these people are simply lost, right? Listen to this one ready. This is from Tashi.

00:11:56

Suze: Well, they're no different than you. My love.

00:11:59

KT: Really? Yeah, but you just said is I have help but I'm sure if I didn't have help, I would have confidence to do this. But it would be, you know, quite a struggle. At first I think it's, it's hard because people are going through the heartbreak and the pain and the loss and that's what this is all about. So, listen to this one.

00:12:21

KT: Uh This is from Tashi. My daughter in her trust left all her assets mainly in her 401k to me to take care of her kids if something were to happen. Sadly,

00:12:35

KT: and this makes me so sad, Suze. Is it? Sadly my daughter left this world before me. Uh, every mom's nightmare. Right? And now I'm taking care of dad, dad and now I'm taking care of her kids, but I adore them

00:12:53

KT: and love that I can take care of them. However money is tight, most of her money was in the 401k. But when I called her work, they said I was not the beneficiary of that account. I know this is the part where Suze tells everyone, get your house in order and keep it updated ready. Everyone, it turns out the ex-husband is the beneficiary.

00:13:21

KT: And then however, Suze doesn't her trust override that beneficiary form. And then, then Tashi goes on to say my daughter would be turning over in her grave knowing he got her money. It was not an amicable divorce. So now what she can't do anything about it. So a lot of these that I'm reading...

00:13:46

Suze: All of you need to know that a trust

00:13:51

Suze: and a will does not override the designated beneficiary of an insurance policy, a retirement account or even how you hold title to your house. Everybody, you hold your house and joint tenancy with right, a survivorship.

00:14:09

Suze: But you think you're gonna leave your half to whoever in your trust. Uh, uh, uh, it will absolutely go to the joint Survivor, whoever else is on that title, if it's joint tenancy with right of survivorship. So, I'm so, so sorry. But how does that happen? How does that happen? I'll tell you

00:14:34

Suze: a lot of times you forget that you even designated a beneficiary. You just think that you have an Ira or a 401k or a 403 B or a TSP and you just took care of everything and you did a trust or you did a will and you forgot that when you signed up for it. Oh, you were married at the time. So you put your husband or your wife or your spouse's name down

00:14:59

Suze: and then here we go. You have no idea how many times I have heard this story and there's nothing you can do about it. It's not just divorce. He KT it's death. You're in love with somebody. You're married. Your spouse is the designated beneficiary is the primary beneficiary. That person dies and you just are in such a state and you forget to add. Now, who do you want now, where should it go?

00:15:28

Suze: Which is why I always said it's really good to have your spouse as the primary beneficiary, but the contingent beneficiary should always be the trust in case something happens, right? And as long as you keep your trust updated, so this person dies you put somebody else in. But usually when you do a trust,

00:15:52

Suze: you designate, as you just said a little bit ago, something happens to A, then it goes to B if it goes, something happens to B it goes to C so you have all these contingencies so that if you forget to do something and change something, it's already there for you.

00:16:10

Suze: However, if you do add a trust as your beneficiary, you have to make sure on a retirement account that it is ac through trust.

00:16:25

Suze: And the reason for that is you want to be able to see through the trust as to who the beneficiaries are going to be to see if they qualify to be an eligible designated beneficiary so that they can have certain benefits. If it's not a see through trust,

00:16:47

Suze: then they won't be entitled to something that maybe they are entitled to. So you best check with your attorney if you're going to leave your trust as a beneficiary of a retirement account

00:17:01

Suze: that it is a see through trust. However, let's say you don't know, you're a little bit confused, just follow these guidelines. Your spouse should always, always, always be your primary beneficiary,

00:17:19

Suze: your contingent beneficiary. If it's a see through trust can be a see through trust. If you don't understand what that means or you don't know, then make your contingent beneficiaries named people, your sister, your son, whoever it may be and not the trust

00:17:40

Suze: I can tell by the look at KT's face, I've just silenced her totally right now. Sorry, girlfriend. I just wanted to say that let's go on to the next question.

00:17:52

KT: Ok. Next is from a Suzy...

00:17:55

KT: Suze, I'm so confused. You said that for those people who died last year that were already taking their RM DS that I did not have to take their RM DS for 2023.

00:18:09

Suze: Correct.

00:18:10

KT: Do you understand that question?

00:18:13

Suze: Yes I do. When you died in 21 22? Right. You, the IRS was very, very confusing in their Secure Act regulations that they passed. So when you inherited an Ira with somebody who is already taking required minimum distributions,

00:18:36

Suze: everybody thought that you had to continue to take the required minimum distribution that the person you inherited it from was already taking. However,

00:18:49

Suze: that was not true if they died last year or the year before they have postponed it because it's still so complicated. So if somebody died last year, for instance, in 2023 and this year, they didn't have to take the required minimum distributions that everybody thought they were going to have to take,

00:19:12

Suze: want to hear the rest of the question says Suze, did I hear that correctly from my friend's father said you were wrong and that I had to take it. He's a financial advisor at his own firm. So I took it if he is wrong, can I put it back in the account? First of all, he is wrong. Tell him to look up. I think it's 2023-54. I think that's it.

00:19:41

Suze: The IRS regulation code and he will find out that I am not wrong. I am absolutely correct. The sad part about it is since you already took it from an inherited Ira, you cannot put it back. All right.

00:19:59

KT: OK. You cannot put it back now.

00:20:02

Suze: All right. But she didn't have to take it.

00:20:07

KT: So now that she should,

00:20:08

Suze: She can't go back and can't go back on this one right?

00:20:12

KT: Next question from Bristol, I took out my R MD this year even though I was only 72.

00:20:20

KT: Now, I realize it was a mistake. Can I put it back?

00:20:24

Suze: Oh, here's one another one. So you put him, you picked them both because you wanted to know.

00:20:29

KT: I'm so confused about this 72. 73. All right. 2023. But here's how you, what you have to know is that yes,

00:20:39

Suze: what's her name?

00:20:41

KT: Bristol.

00:20:41

KT: You can put it back in your case, not in the case before this, right? So Suze cannot, but you can as long as you took the required minimum distribution

00:20:59

Suze: before July 31st of this year and you have until September 30th of this year

00:21:10

Suze: to put it back as long as you were born in 1951. Now, KT why are you looking at me like that?

00:21:19

KT: I was gonna remember and know all this information.

00:21:21

Suze: And that's why you have a podcast and a Suze notebook to write these things down. Now, I get,

00:21:30

Suze: they are confusing. I get you like eligible, designated beneficiary uh rollover with an R MD. You can put it back, you can't put it back a stretch. You have to know these things. That's why I did the podcast that I did on Thursday.

00:21:51

Suze: You have to get involved. You cannot say, oh my God, this is too complicated. I don't want to deal with this. My head is spinning. Your head better be spinning and you better listen to this podcast over and over again until your head doesn't spin.

00:22:10

Suze: I, you can keep one what?

00:22:15

KT: My head isn't attached anymore.

00:22:20

KT: I don't mean to laugh Suze, but it's not easy. This is a complicated topic. I hope I picked questions that are going to help some of you out there. And if they don't, at least now when you're confused, you know where to go and get the answers right.

00:22:35

Suze: Ask me one more.

00:22:37

KT: I have one more left. This is from Jackie, Suze. Just love your podcast. I know you can help me. And if you can, I'm gonna call KT.

00:22:47

KT: She didn't write that. OK. Both myself and my brothers were the beneficiary of my dad's Ira,

00:22:54

KT: but my brother was killed in a plane crash years ago. Recently, my dad's death. I know that's when people find out about all this inherited business. Right recently my dad died. But both me and my brother are named as the beneficiaries per capita, whatever that means. However, all the money has been given to me. And now my brother's wife is saying that

00:23:24

KT: half legally should go to my deceased brother's kids. Is that true?

00:23:31

Suze: This will be your pop up quiz.

00:23:33

KT: Can I answer it?

00:23:35

Suze: Well, do you know the answer?

00:23:38

KT: No, I don't know the answer if it's true or not. But I think that it should. I think that it should because it, the dad named both her and her brother as the beneficiary, the brother died. Dad forgot to make the changes.

00:23:51

KT: So she is the only surviving beneficiary. She got everything. But yeah, she should give some of that money to her brother.

00:24:01

Suze: So legally you think it should go

00:24:04

Suze: to

00:24:06

Suze: the brother's kids?

00:24:07

KT: No, no, no. I don't think that it's a legal thing, but morally, morally.

00:24:12

Suze: Moally is not what this person's asking.

00:24:14

KT: I think that if this is a pop quizzie, I'll say that legally she doesn't have to legally the beneficiary that's surviving gets the whole pot the whole kid.

00:24:26

Suze: So listen to me closely now, ding ding, ding, ding. But notice how lethargic that ding ding ding was because I'll tell you why

00:24:35

Suze: the mere fact that the father added the words per capita. Is that what you said?

00:24:45

KT: What does that mean?

00:24:46

Suze: What that means is the father wanted. If one of them died, that the other

00:24:53

Suze: other one would get all of it. There are two ways KT to designate a beneficiary. And by the way, all of you on your retirement accounts, sometimes now they're actually putting this there and if not, you should write it in, but there are two ways to leave money to a beneficiary. One way is per capita. The other way is something called per sterpies.

00:25:22

Suze: All right. Now, what does that mean? Per Sterpies simply means if you die before the person who left you something, your share goes down to your kids and you can designate the percentages of who gets what

00:25:41

Suze: Per capita means if you and other people are named as beneficiaries and the owner of the retirement account or whatever it is dies, then your share goes to the remaining beneficiaries that were named. Do you want me to give you an example of that?

00:25:59

KT: No, I just want to know the dad wrote

00:26:03

Suze: per capita. She and her brother are named as beneficiaries per capita.

00:26:07

KT: That's right. So per capita means... the brother dies, which means the sister gets everything.

00:26:12

Suze: That's right. And that's what the father wanted. So whether morally she should give it to the kids of her brother or not, is another question legally. And according to what the father wanted because he put those words in,

00:26:31

Suze: that's not what the father wanted.

00:26:35

KT: So legally, legally, she doesn't have to give any of that money to not on any level. I think it's right that she does.

00:26:44

Suze: Well, it depends, the father obviously didn't want that.

00:26:48

KT: Maybe he didn't want it to go to the wife.

00:26:50

Suze: Who knows what? But you have to kind of do what the father designated there and therefore.

00:26:58

Suze: Right. It just depends. Did the, did the brother get a big insurance policy? Who knows what happened there?

00:27:04

Suze: But somehow the father wanted it to just go between them not to anybody else. So that what if you don't designate a a or a per capita that it can become very, very confusing. Well, no, then legally, then legally she probably could go back and then you have lawsuits and all kinds of things happen.

00:27:29

Suze: So all of you should designate on your 401k s your Ira s, especially if you have multiple beneficiaries, you should designate whether they're per or per capita. There are many retirement accounts now that actually ask you to check which one do you want?

00:27:51

Suze: And so you should know what they mean. There you go. KT are you ready? We're gonna go watch.

00:27:59

KT: Can't wait. All right.

00:28:00

KT: So this is really a tough one.

00:28:03

KT: Well, who do we want to win?  Spain.

00:28:08

Suze: You want Spain to win?

00:28:09

KT: I do.

00:28:10

KT: Well, then we study Spanish all summer long and I really want to say, you know, Bravo and, and speak Spanish all day.

00:28:21

Suze: All right. Well, you can do that if you want, but I personally want England to win just because I do. Right. You want Spain to win? So we'll sit on the opposite sides of the room. But for all of you,

00:28:35

Suze: you got to watch it. Oh my God. It's just starting. It's starting right about now. And so we'll see what happens. But

00:28:44

Suze: until Thursday when we have another Ask KT and Suze anything, there's only one thing that we want you to say every single day and it is today, wherever I go, I will create a more peaceful, joyful and loving world. And if you do that

00:29:10

Suze: and what am I going to do with her? And if you do that, we promise you what that England will win and you will be unstoppable.

00:29:28

Intro/Outro: Music (out).


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