inheriteed IRA
My father died in Jan 2021 at age 90. He was very organized. Everything was set up properly, except 1 bank IRA, which somehow had “my estate” listed as the beneficiary.
My sister is executor of the estate, and she thinks we can still do a rollover Inherited IRA, even with the estate listed as beneficiary. Is that right?
The bank is a small local bank, and won’t have resources to handle something sophisticated. Have you guys done a white paper on whatever process is needed?
Thanks.
Permalink Submitted by Alan - IRA critic on Thu, 2021-06-03 00:36
An executor’s job is to settle the estate and distribute estate assets such as this IRA to the estate beneficiaries. Numerous IRS letter rulings allow the executor to assign the IRA out of the estate to the estate beneficiaries. This is a non reportable transfer to an inherited IRA of the estate beneficiary. Many custodians deny knowing about this, but most of them know it has been consistently allowed by the IRS. Sister needs to send instructions as the executor to the bank to assign the IRA and provide the names, contact info and SSNs of the estate beneficiaries.
The estate does not have to distribute the 2021 RMD, likely not yet taken by your father before passing and it will simplify estate 1041 reporting if the bank is instructed not to make any distribution. Banks often dislike inherited IRAs, so if there is resistance from the bank to accept assignment, sister might try having the beneficiaries agree to transfer their inherited IRAs out to their preferred IRA custodian.
Assignment does not affect the RMD requirements. The year of death RMD must still be distributed to some combination of the estate beneficairies from their inherited IRAs once they are created. Often when there are several estate beneficiaries, one of them will want to take a distribution large enough to cover the entire year of death RMD. Starting in 2022, each beneficiary will have to take a beneficiary RMD based on the remaining life expectancy of father, which will be in the range of 4-5 years using the new single life table effective in 2022.