Another non-spousal Inherited IRA titling question
I’m transferring assets in a non-spousal inherited IRA (I’m beneficiary of my deceased parent) via direct wire from 1 major custodial financial institution to another custodial financial institution (Fidelity). Before this transfer, I’ll open the new inherited IRA account w/ Fidelity. I’ve read Ed Slott’s advice re: “titling” of the inherited IRA. The account being transferred is titled correctly (beneficiary and deceased clearly indicated). BUT I’m concerned about the title of the Inherited IRA account I will open at the receiving institution (Fidelity). I prefer to have this titled as Ed Slott suggests, however, various institutions have their own titling formats. I want to make sure the new Fidelity title will comply with the IRS. Is this title proper? Thanks so much.
New title:
Fidelity Inherited IRA
“My Name” IRA BDA/Original Depositor “My Parent’s Name”
FMTC Custodian
Note that the Fidelity title doesn’t indicate my parent is deceased, altho that should be obvious.
Thanks so much.
Permalink Submitted by Alan - IRA critic on Fri, 2016-10-21 23:32
The IRS does not care as long as the beneficiary and decedent are both listed and identified. The rest of the format is generally immaterial to the IRS, but if recommended by Fidelity it probably best fits their processing platform. The “BDA” (stands for beneficiary distribution account) indicates that the owner is deceased. In addition, due to the sheer size of Fidelity and the thousands of inherited IRAs they set up every year, if there was an IRS related problem, they would have to resolve it.
Permalink Submitted by Vicki Stivala on Wed, 2016-11-23 20:05
Thanks so much, Alan. I have new information and question in connection with my original post.I opened the new Inherited IRA account with Fidelity (established thru NFS). However, I have not yet transferred funds from the original custodian/Inherited IRA into the new inherited IRA account with Fidelity because I noticed the title does NOT contain the name of my deceased parent/original owner (as required by IRS). The title of the new Inherited IRA (Fidelity) account established thru NFS is: NFS/FMTC IRA-BDANSPS MY NAME(MY ADDRESS) I expressed my concerns about this title and asked if NFS/Fidelity can accomodate me by including my deceased parent’s name in the title. In light of their response (below), can I safely transfer the funds (direct, trustee-to-trustee) from the exisiting account to the newly established inherited IRA account with Fidelity (established via NFS) w/o triggering immediate taxation on the account’s entire value?Here’s NFS’s reply: “The decedent name does not show in the account title. Due to sensitivity many BDA account owners would not want it to show, similar to not showing the bene’s on the statements either. However, as for satisfying IRS requirements, the 5498 tax form generated each year by NFS does display the original depositor information.”I asked if NFS/Fidelity could find a way to include on the account title both my name as beneficiary and the name of my deceased parent as original owner/depositor. They explained that most of this titling issue was in regard to the DOS based computer system, which is how accounts are established. “Computer system cannot be changed to display the decedent on the statement as part of the registration, however as required NFS does capture the identify the original depositor on the account, and BDA account cannot be coded valid without it.””It is possible if the account owner just wants to see the decedent’s name display on the mailings to put that person’s name” on the additional address line. For e.g., “ORDP FIRSTNAME LASTNAME” or “DCDNT FIRSTNAME LASTNAME” could be entered and it will show under my name as the account owner and before the address lines. I contacted IRS (and was on hold for 30 mins.) about this. They said they cannot answer my question until tax season begins.What do you think?Many thanks.
Permalink Submitted by Alan - IRA critic on Wed, 2016-11-23 20:54
I was not aware that Fidelity did not show the decedent’s name, but it must be OK with the IRS because many thousands of beneficiaries are taking distributions from such accounts with no reported problems. “BDA” stands for beneficiary distribution account, so this is obviously not your owned IRA account. Finally, in the past even if a new owned account receives a beneficiary transfer in error, it is not necessarily a taxable transfer and the account can be retitled correctly. However, if a beneficiary transfers is made into an existing owned IRA with a balance, that error cannot be fixed. So you will be OK for a number of reasons, and should have no cause to be concerned. Just be sure the account is set up as you described and Fidelity explained.