By Linda Toga, Esq.

THE FACTS: 

My mother died recently. Her will provides that I am the executor of her estate and directs that her estate is to be divided equally between me and my two siblings. In addition to her bank account and her home, my mother had an inherited IRA and a Roth IRA. My sister is the beneficiary on the inherited IRA and my brother is the beneficiary of the Roth IRA.

THE QUESTION:

Based upon my mother’s will, am I entitled to 1/3 of the assets in the IRAs?

THE ANSWER: 

The quick answer is NO. Regardless of whether it is a traditional IRA or a Roth, how the funds in an IRA are distributed upon the death of the account holder is governed by the beneficiary designation form associated with the account. A will only governs the distribution of probate assets which are assets that are owned individually by the decedent and are not subject to a beneficiary designation. The only time assets in an IRA would be subject to the terms of a will is if none of the people named on the beneficiary designation form associated with the IRA were alive at the time of the account holder’s death.

Unfortunately for you, unless your siblings chose to share some of the funds they receive from the IRAs with you, you are only entitled to 1/3 of your mother’s probate assets after all of her last expenses and the expenses of administering her estate are paid. 

Interestingly, even if the balance in each of the IRAs is the same, it is unlikely that your siblings will enjoy equal shares of your mother’s estate. While they are both entitled to a share of the probate estate that is equal to your share, your sister will have to pay income tax on the distributions she receives from the traditional IRA while your brother will receive all of the assets in the Roth IRA income tax free. 

If your mother wanted you all to share equally in her estate, she should have named all of you as equal beneficiaries on both of the IRAs. In the alternative, her attorney could have added language to her will that provided that the value of any non-probate assets passing to her children was to be taken into consideration when calculating the share of her probate assets passing to each of her children. If your mother’s will directed you to consider non-probate assets when distributing her probate estate, you would get a larger share of the probate assets to compensate for the fact that you were not named as a beneficiary on either of the IRAs. 

Although you are not entitled to funds in the IRAs, the fact that you are named as the executor of your mother’s estate entitles you to statutory commissions. Commissions are based on the value of the probate estate and can be significant. Oftentimes when a family member is the executor, he/she elects to not take commissions since doing so decreases the size of the estate that is distributed to the beneficiaries. 

However, if you feel strongly that your mother’s wish was that you received as much from her estate as your siblings, and your siblings do not feel inclined to share with you some of the non-probate assets they receive from the IRAs, you may want to consider taking commissions to help balance things out. 

The fact that your mother’s wishes may not be realized highlights the value of working with an experienced estate planning attorney and the importance of considering all of your assets when engaging in estate planning. If you do not take into consideration jointly held property and accounts, transfer on death designations, retirement plans and life insurance policies when engaging in estate planning, there is a good chance that your estate plan will not accurately reflect your wishes. 

Linda M. Toga, Esq. provides legal services in the areas of estate administration, estate planning, real estate and small business services from her East Setauket office.  Call 631-444-5605 or vising her website at www.LMTOGALAW.com to schedule a consultation.