inherited IRA
I was told by Beverly @ Ed Slotts that you cannot transfer an IRA to an inherited IRA unless you first change the existing IRA to an inherited IRA. then you can transfer to another company as an inherited ira if so desired. Beverly stated if you do not do this, you lose the status of an inherited IRA.
EXample: mohter dies with no spouse and leaves IRA with SunAmerica to her son.
you must 1st change the ira with sunamerica to an inherited ira.
then you can transfer the inherited ira to another company if the son so desires.
Now I was told the opposite by someone on this forum. I was told that you can transfer an IRA to an inherited ira to any company of your choice without having to change the Ira status first.
Would someone please tell me the correct answer. both can’t be right.
thank you,
Douglas
Permalink Submitted by Denise Appleby on Thu, 2007-10-18 21:05
It’s a matter of operational requirements and/or limitations.
Both responses are correct, depending on the financial institutions capabilities.
From your client’s perspective, all you need to know is whether the delivery of assets from the account was treated as a [url=http://retirementdictionary.com/Distribution.htm%5Ddistribution%5B/url%5Dresul… in a [url=http://retirementdictionary.com/1099-plan.htm%5D1099-R%5B/url%5Dbeing issues. If the transaction was nonreportable on both the receiving and delivering ends, all should be OK.
The rest is the responsibility of the custodian.
[b]Some background[/b]
When an IRA owner dies, certain tax reporting requirements must be met. For instance, for the year the IRA owner dies, the custodian is generally required to report the [url=http://retirementdictionary.com/Fair-Market-Value.htm%5DFMV%5B/url%5D of the decedent’s IRA and the FMV of each beneficiary’s share . For some firms, usually brokerage firms, they can only accomplish this is the beneficiary’s share is moved ( non-reportably) to an [url=http://retirementdictionary.com/Inherited-IRA.htm%5Dinherited IRA[/url] for the beneficiary. Additionally, this movement of assets to the beneficiary’s inherited IRA must be done to ensure any distributions that occur after the death of the IRA owner is reported in the name and TIN of the beneficiary ( and the name of the decedent)
Not all firms need to take this step, as they are able to finagle their systems so as to accommodate the required tax reporting, even if the assets remain in the same account owned by the decedent. These firms would usually update the registration of the decedent’s IRA to include the name of the beneficiary, and put measures in place to ensure the necessary reporting occurs correctly.