Inherited IRA Beneficiary does not respond
My two siblings and myself are the named beneficiaries of my deceased father’s IRA. Two of us have completed all of the paperwork to inherit 1/3 each of this year’s RMD that my father had not yet taken, as well as 1/3 of the remaining value of the IRA.
One of my siblings is estranged from the family, and has not responded to mailed requests to complete the forms.
The company that invests and manages the IRA account says that my sibling and I who have complied with the form requirements cannot receive our funds until the estranged sibling responds.
Is this true? What law permits the company to withold our IRA inheritance?
The brokerage as well as two of the beneficiaries are in Washington state. I reside in Virgina. My father’s residence at the time of his passing was in Florida. Does this matter since federal law governs IRAs?
Do we need to retain an attorney to get the company (Stanley Morgan/Smith Barney) to release our funds to us? I
Permalink Submitted by Alan - IRA critic on Tue, 2016-09-06 18:49
Every so often this comes up, as the custodian refuses to establish separate inherited IRA accounts until all beneficiaries submit the paperwork. There is no regulation requiring this, so this custodian must be leaning on internal procedures to justify it, unless their IRA agreement beneficiary clause addresses it. Check the agreement if you have a copy of it, then call and elevate the question to supervisory level. Ask what it will take to have the separate inherited IRAs established. The year of death RMD can be taken in any combination among the beneficiaries, and can also be taken after the separate accounts are created and transferred to another custodian. Is is presumed but not documented that the IRS would not levy any penalties on a beneficiary who takes only their share of the year of death RMD, even though all beneficiaries are jointly responsible. Nonetheless, if the two of you decided to split the year of death RMD between you, and create your separate accounts at the same time, perhaps the custodian will bend. The IRS would not be happy if the custodian froze the account and prevented the year of death RMD from being distributed and perhaps some years of your own beneficiary RMDs as well. The custodian’s policy might be aimed at easing the accounting of separate shares, but if they simply establish separate inherited IRAs with 2/3 of the balance, the non responding beneficiary essentially will own the remaining balance which becomes the third separate account. That would solve the custodian’s accounting concerns.