Q: My wife, who owned a traditional IRA, recently died. She did not specify a beneficiary. Do I inherit the IRA? Is probate necessary?

A: When an IRA owner dies without specifying a designated beneficiary on the custodian beneficiary form, the IRA agreement determines the beneficiary. The agreement may indicate specific order of beneficiaries, such as spouse first, then children, then parents, then estate. Or the IRA agreement may specify that the assets associated with the account revert to the estate of the of the IRA owner.

If the agreement specifies that you are first in line to be the beneficiary, you would be considered to be a designated beneficiary and probate would avoided. You would be allowed to “stretch out” payments from the IRA account based on your life expectancy.

If the agreement specifies that the account will be turned over to your spouse’s estate, then the beneficiary will be determined by state intestacy law unless your spouse specified otherwise in her will.

Q: I am 62, and my wife is 60. I plan on waiting until age 70 to apply for my Social Security benefit. My wife, who has worked long enough to be eligible for Social Security benefits, plans to apply at 62. How much will her benefit be reduced if she applies when she is 62? Also, after I apply for my benefit, how will her spousal benefit be computed then? If I die before her, how will her survivor benefit be computed?

A: The full retirement age (FRA) of your wife is 67. If she applies for her work benefit when she is 62, her FRA benefit will be reduced for the first 36 months prior to FRA by 5/9 of 1% for each month, for a total of 20%. For the next 24 months the reduction will be 5/12 of 1% for each month, for a further total of 10%. Adding these together, her FRA benefit would be reduced by 30%. When you retire at 70, your wife would be eligible for whichever amount is higher, 35% of your FRA benefit, or your wife’s Social Security benefit based on her work record.

Regarding the survivor benefit, since your wife will have reached her FRA when you apply for benefits, if you predecease her, she will be eligible for 100% of your age 70 Social Security benefit.

Q: I had applied for Social Security benefits when I was 62. I have now reached my full retirement age. My wife passed away recently. I was under the impression from your columns that survivor benefits were independent from benefits related to my work record. The benefit my wife had been receiving from Social Security was greater than the amount I am now receiving based on my work record based on my application at 62. When I contacted Social Security about switching to a survivor benefit, the representative told me that because I applied for benefits at 62, my survivor benefits would be reduced accordingly. Was he correct?

A: He was not correct. If you apply for a survivor benefit after you reach your full retirement age (FRA), you are entitled to 100% of your spouse’s Social Security benefit, as long as it is greater than the Social Security benefit you are receiving, even if you applied for your benefit prior to reaching your FRA. Following are Social Security references that you can provide Social Security Administration representatives that verify the independence of survivor benefits.

Public references:

https://www.ssa.gov/benefits/survivors/ifyou.html#h2: 2nd bullet under “A few other situations.”

https://www.ssa.gov/benefits/survivors/ifyou.html#h6: 4th bullet under “Other things you need to know.”

Technical reference for SSA personnel:

POMS RS 615.150 A at https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615150,

These references confirm that you are entitled to 100% of your wife’s SS benefit, which is independent of your benefit at age 62.

(Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.)

© 2020 ELLIOT RAPHAELSON. DISTRIBUTED BY TRIBUNE CONTENT AGENCY, LLC.

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