I have a friend that has an inherited IRA from her aunt who died 14 yrs. ago. She is one of 4 beneficiaries of the IRA. He would like to move her portion of the IRA to another custodian, but is being told that she can’t. Is there some way this can be accomplished? She feels as though her money is being held hostage!
This is rare when the beneficiaries have provided all their data and death certificate to the custodian. Most custodians prefer not to have multiple SSNs reported on the 1099R forms generated for inherited IRA distributions and therefore set up separate inherited IRAs. This also permits each beneficiary to control the investments in their inherited IRA accounts and prevents having to coordinate any changes. Finally, it simplifies the recording of successor beneficiaries for each beneficiary. Maintaining a multiple beneficiary IRA has also resulted in the RMDs being based on the age of the oldest beneficiary, so the younger beneficiaries have had to receive higher distributions than if they had created separate inherited IRA accounts by the year after owner’s death.
It is very odd that she has put up with this for 14 years. I hate to think how high the expenses are for the investments held in this IRA, but that said the transfer to an insurance company IRA annuity might result in more of the same. In pursuing a transfer, she needs to be very careful to avoid signing a distribution form, since any check made payable to her will result in a full taxable distribution of her share. Funds can only be transferred by direct trustee transfer.
No, a non-spouse beneficiary is not permitted to roll over a distribution from an inherited IRA.
Permalink Submitted by Alan - IRA critic on Mon, 2021-03-15 19:08
I assume she has created her own inherited IRA at least 13 years ago and has been taking annual RMDs except for 2009 and 2020. She can do a direct trustee to trustee transfer to another custodian of her choice. Is the current custodian an insurance company, or does she have non standard investments in the inherited IRA? Those are the usual cases where a transfer is problematic.
Permalink Submitted by Allen Gage on Mon, 2021-03-15 20:12
She and her siblings are all in the same account. She does have the RMD distributed to her on her share yearly. She would like to move her portion of the account from the bank that has her funds now, to an insurance company, creating an individual inherited IRA with inly her funds. The bank has given her horrible customer service and she wants to have control over her portion. As it stands, she dosn’t receive any statements on the account and the banker will not even return her phone calls, thus her desire to go elsewhere.