Non-spouse bene IRA established as a Traditional IRA
Our client inherited her mother’s IRA last year May or June of 2017. Client is looking to transfer her account here in a beneficiary IRA and I noticed that the account registration just states “IRA” not a “Beneficiary IRA”. After the client questioned the current custodian, we found out they established a traditional IRA and not a beneficiary IRA and are correcting it. Current custodian will be reissuing a new 1099.
Are there any issues here?
Permalink Submitted by Alan - IRA critic on Wed, 2018-03-14 19:36
If there had been no transactions and the custodian is willing to re title the inherited IRA correctly, there will not be a problem. How was the money moved from her mother’s IRA, and was that the account that issued the 1099?
Permalink Submitted by Wendy Mommaerts on Wed, 2018-03-14 19:40
Her mother’s account was setup at the bank as a POA account. She and her brother received 1/2 of the account. I do not know what account the 1099 was issued from, I would assume the mothers???
Permalink Submitted by Alan - IRA critic on Wed, 2018-03-14 20:00
Not clear what happened. But if a corrected 1099R rescinds the original, then the original can be disregarded. Once the IRA is correctly re titled, it can then be transferred as a non reportable transfer (no 1099R) to your firm. The key is that incorrect re titling of an inherited IRA is NOT considered a distribution and can be corrected as long as there was no actual distribution in the form of a check made out to the client.
Permalink Submitted by Wendy Mommaerts on Tue, 2018-03-20 13:33
Hypothetically…Our client was able to have her IRA corrected and retitled to a bene IRA, however her brother had no idea his was not titled correctly.What issues would our client’s brother have If the IRA he inherited from their mother was established at his CU as an IRA not a bene IRA then transferred to another custodian as an IRA (brother would not receive the check)?
Permalink Submitted by Wendy Mommaerts on Wed, 2018-03-21 12:58
Hypothetically…Our client was able to have her IRA corrected and retitled to a bene IRA, however her brother had no idea his was not titled correctly.What issues would our client’s brother have If the IRA he inherited from their mother was established at his CU as an IRA not a bene IRA then transferred to another custodian as an IRA (brother would not receive the check)?
Permalink Submitted by Alan - IRA critic on Wed, 2018-03-21 15:30
Brother did not take a distribution, so his inherited IRA could be properly retitled as well. However, since the current custodian was not holding the account when mother passed, they do not have their own records to review which would clearly show a titling error. Brother will probably need to submit copies of mother’s IRA account just before her death showing him as a beneficiary, and copies of his new IRA documents at former custodian to show a clear paper trail to the current custodian. In other words, it will be more challenging to convince the new custodian than it was the old custodian to re title the IRA. It might help if his sister allows him to show that her IRA was retitled by the original custodian. Brother should discuss this with senior staff since the average CSR would not be able to handle this request.