Inherited Roth IRA Transfer?

Submitted by Thomas Ransone on Thu, 2013-01-03 15:29

***Trouble with direct transfers of an Inherited Roth IRA?*** I have an Client who has inherited a Roth IRA (non-spousal) in a John Hancock VA. We sent properly titled transfer paperwork from another custodian and JH is rejecting the transfer, stating their interpretation is that the Inherited Roth IRA cannot be transferred. When asked if the account was an Inherited IRA, they stated they would send the transfer, which I suspected as we have done many in the past!? Lastly, I believe I am correct that Inherited Roth and TIRA’s do not have 60 day provisions, correct? Any help/direction is greatly appreciate!



Submitted by Alan - IRA critic on Thu, 2013-01-03 16:23

Correct. The only way to change IRA custodians for a non spouse beneficiary is by direct trustee transfer to the new custodian. Any checks payable to the beneficiary directly are taxable and cannot be rolled over.

Submitted by Thomas Ransone on Thu, 2013-01-03 17:00

Thank you for the confirmation.  I have completed many direct trustee transfers for non-spousal Inherited TIRA’s, for which I find clear code reference allowing for direct transfers, but this is the first non-spousal Inherited Roth and I can’t seem to find code specifically referencing the direct transfers.  Have you heard of other custodians rejecting transfers or have suggestions for supporting materials? Thanks!

Submitted by Alan - IRA critic on Thu, 2013-01-03 17:23

  • Occasionally, this comes up, mostly with insurance companies who have issued Roth IRA annuities. The basic rules for a Roth IRA are the same as for a traditional IRA, except where Roth IRA Regs state differently. This is established by the following IRS Reg: http://www.taxalmanac.org/index.php/Treasury_Regulations,_Subchapter_A,_Sec._1.408A-1
  • The Roth IRA rules do NOT address transfers for the above reason. The insuror should proceed the same as they would with an inherited traditional IRA annuity. By refusing a transfer, they are effectively holding the beneficiary hostage to their annuity with the only other option being a full distribution that would destroy future Roth generation of tax free gains, not withstanding the RMD requirement. If they continue to resist, I would insist on involving higher levels of authority for this insuror.

Submitted by Thomas Ransone on Thu, 2013-01-03 18:43

Thank you again, I feel the exact same way and it’s nice to know I’m not viewing this incorrectly! 

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