Non-Direct R/O of Bene IRA
Client received a check from Merrill for her half of an IRA, of which she was a beneficiary, prior to doing a direct transfer into a new bene IRA. She has not cashed the check yet. Is it possible for her to do an indirect transfer to a new bene IRA? Other options??
Permalink Submitted by Alan - IRA critic on Tue, 2014-08-12 18:58
Once a distribution is made from a non spouse inherited IRA, there is no way to roll it over. Did client request this distribution? Since client will be taxed on this distribution, perhaps she can use it to subsidize increased retirement plan contributions at her workplace if she works. Pre tax 401k deferrals will offset the inherited IRA distribution income dollar for dollar.
Permalink Submitted by Brian Bishop on Wed, 2014-08-13 19:02
If the check hasn’t been cashed, can she return the check or void it and re-request a rollover? Or is it still too late?
Permalink Submitted by Alan - IRA critic on Wed, 2014-08-13 20:17
She could try, but I suspect that ML will not accept it back unless ML was negligent in distributing the funds in the first place. No harm in asking however. This happens to be the most frequent and costly error made with non spouse inherited IRAs, so it would be nice if the custodian warned the beneficiary that no rollovers are allowed. There has been talk of potential legislation changing the tax code to allow 60 day rollovers in the future, but it could take years to pass it.