Hello,

I am working with an advisor who’s client passed away. The client had a employer sponsored 401K that was moved at death to the beneficiary who is a minor, so the assets are now in a Custodial Inherited 401K held at Fidelity Direct. The goal is to ultimately move these assets into a Custodial Inherited IRA at NFS (separate firm). Ideally, we would have moved the assets from the Custodial Inherited 401K at Fidelity Direct to a Custodial Inherited IRA at Fidelity Direct, and then subsequently do a trustee-to-trustee transfer to a Custodial Inherited IRA at NFS.

The issue is that Fidelity Direct has informed us that they will not allow a Custodial Inherited IRA to be opened at all – they simply do not allow these types of accounts to be opened. Fidelity Direct suggested instead processing a direct rollover from the inherited 401(k) held at Fidelity Direct to the custodial inherited IRA at NFS, indicating that Fidelity Direct will code the 1099 as a direct rollover on their end.

Does anyone see any issues with coding this transaction across firms as a direct rollover? I know this may be more of a firm-specific question as to how they handle coding things, but does this seem invalid in any way? Thank you!