401k death proceeds paid to a participant IRA
In 2013, almost $300,000 was transferred from a 401k from the account of a deceased plan participant to the IRA account of an ex-spouse. $200,000 of the funds has been placed in annuities with the remainder in a brokerage account. Yes there were IRA funds in the IRA account prior to the 401k distribution so the funds have been comingled.
My office took over the management of this account a few months ago and I just caught the error. I pointed it out to the representative in charge of the account and would like your advice on how to correct the error.
Permalink Submitted by Alan - IRA critic on Sun, 2017-02-26 23:22
There is no “template” to fix this. What did the 1099R show in 2013, a direct rollover of all 300k? DId any of the 300k go to an inherited IRA? Was an inherited IRA account even opened? Is the 200k in an owned IRA annuity, and 100k in a taxable brokerage account? In general, the current custodians are probably going to take a hands off approach to this, and will not admit making an error or they would have to fix it. That would leave 2 choices, either paying the taxes on the distribution (some it already would have been taxed as beneficiary RMDs) or applying for a PLR with a request that the accounts plus allocated earnings less RMDs for 2014-2016 be transferred to an inherited IRA.