Forcing lump sum payout of IRA
I’ve never seen such a situation before and would like to know if you concur with the advice they have been given.
John and Jane Doe: Jane recently died and she has an IRA annuity held at Wells Fargo. Jane is the annuitant but the owner is listed as Wells Fargo Clearing Services LLC Custodian FBO Jane Doe. The problem appears to be the beneficiary is also listed as Wells Fargo Clearing Services LLC Custodian FBO Jane Doe. It was the intention of Jane to list her revocable living trust as beneficiary; however, the advisor failed to make that happen. Wells Fargo is taking the stand that because the owner and the primary beneficiary of this IRA have the same social security number, then the only option is an immediate lump sum payout (no spousal continuation or re-registration allowed). Does this sound correct? Thanks.
Permalink Submitted by Alan - IRA critic on Fri, 2017-11-03 16:29
If the beneficiary indicates FBO Jane Doe (WF would have an EIN, only Jane would have a SSN), I think the death benefit will go to her estate, perhaps will end up in the RLT per a pour over will. If so, and trust distributions can be made to the surviving spouse, there have been PLRs allowing a rollover to the surviving spouse (eg PLR 2007 07025). If Jane passed prior to the RBD, the 5 year rule will apply and likely a near immediate distribution to the estate, so it may be useful to try and hold off the IRA distribution to determine if a custodian can be located to accept a rollover contribution to John. Otherwise, the 60 day rollover deadline can become a problem. It would also be worthwhile to discuss the situation with a senior staffer in Wells Estate division to get their perspective on what their IRA agreement indicates in this situation inclusing possible advisor error/omission. For example, had the trust been named and the trust was qualified for look through, then the 5 year rule could be avoided per IRS Rules, but who knows how the Wells IRA agreement syncs up with the annuity contract. There are so many possible contingencies here, that any one of them could change the possible outcome.