Received check made out to closed IRA account, how to handle?
I used to have an account at a brokerage #1 which I closed and transferred to another brokerage #2. Recently I received a check from a mutual fund I used to hold at #1 as a legal settlement. It was made out to brokerage #1 CUST IRA FBO my name. Since I no longer have the IRA account with #1, I cannot send the check to them to be deposited. I cannot send the check to brokerage #2 where my IRA currently is since the check is not made out to them. I do not know what to do. Since the check amount is rather small, under $50, I would be willing to pay the income tax if there was an easy way to deal with this. Can I deposit the check into a non-IRA account with brokerage #1 which I still hold a non-IRA even though it is made out to them as an IRA? I called brokerage #2 and they said they cannot accept the check since it is not made out to them, and suggested that I get the check re-issued to brokerage #2 . That seems like a lot of work. Anyone know what is the easiest way to deal with this? Thanks!
Permalink Submitted by Alan - IRA critic on Wed, 2022-06-22 13:33
Are you sure that the IRA account at #1 has actually be closed? Many IRA custodians leave the account open for a couple years even if there is no balance. If the account still exists you could try to endorse the check for deposit to the old account and the custodian may accept it as a “restorative payment”, which the IRS clearly allows. You could then do a direct trustee transfer of the balance to your current IRA. Tell #1 that you do not intend to keep the small balance there and as soon as it is transferred they can close the account for good. If this does not work, you could request that the check be reissued by the issuer with the new payee.