Conduit IRA
My mother recently passed away and my brother and I are beneficiary’s. Smith-Barney tells me my 50% share will go into a Conduit IRA account. I was under the impression it is called a “Stretch, Beneficiary or Inherited” IRA. I also thought a Conduit was a “holding” type of account. My Mom tried her best to help with my future with the lifetime distributions and I just don’t trust these folks to do right by me. Can someone explain a Conduit IRA for me? Even my CPA never heard of it.
Thank you in advance.
Permalink Submitted by Clyde Wolf on Mon, 2008-11-10 02:03
Doxie22,
I am sorry to hear of your loss.
In the sense of an inheirted IRA, I am not familiar with using a Conduit IRA. Typically the Conduit IRA is used when we are moving a former employer plan to an IRA, the purpose is to keep the Conduit IRA free from any hint of containing already taxed money. The money in the Conduit IRA could someday be moved into a new employer’s plan if that plan accepted such money.
You will want to keep your mother’s name on the inheirited IRA.
Was your mother taking RMDs and if she was, did she take her 2008 RMD?
You will need to begin taking an RMD from the inheirited IRA the year after your mother’s death.
I think you should try contacting Smith Barney again and talk to a different representative.
Permalink Submitted by Alan Spross on Mon, 2008-11-10 04:52
cwolf is correct.
The term “conduit IRA” is totally inapplicable to your situation, so connect with a retirement account specialist when you next contact Smith Barney.
Permalink Submitted by Al Fry on Mon, 2008-11-10 16:05
I have heard many advisors (and home office people) use the term conduit IRA when referring to an inherited IRA. I don’t know these misconceptions get started, but they certainly spread.
Permalink Submitted by Jose Morales on Mon, 2008-11-10 17:05
“Conduit,” “Stretch,” “Rollover,” “Beneficiary,”… These are all just adjectives used to describe the same IRA. As explained the term “Conduit” is most correctly used when describing funds that have been rolled over from a qualified employer sponsored plan to an IRA account that is not intended to have “contributory” funds mixed in. There is nothing different about the IRA itself however.
In the situation in which a beneficiary does not wish to take a full distribution of their share of an IRA which they inherited, an intermediary IRA is opened to allow the beneficiary to take minimal distributions on a yearly basis, beginning in the year following the year of death. Some people use the term “Stretch” others “Beneficiary” to describe this IRA. However it is not a different type of IRA. There are no alternate plan documents to establish these IRAs as a distinct type of IRA.
I think of them more along the lines of marketing terms that can frequently make my life frustrating, as they are often used incorrectly. What is more important than the word placed before “IRA” is that they are aware that you are a non-spouse beneficiary who wishes to take minimum distributions and not close the IRA account all at once. This person may be using the term “Conduit” as a way of expressing that it is acting as a holding account for funds that will ultimately be disbursed to you on a yearly basis. Not exactly a standard way of describing them but ultimately the function is the same regardless of the word used to describe the account.