non spouse recieved assets from deceased via check- options?
a custodian disbursed assets from the deceased’s IRA to non beneficiary via check made payable to the daughter. now daughter says what are my options. she had originally filled out the paperwork to have the funds processed as rollover. as a non beneficiary of a deceased who is either of rmd age or not ( does it matter in this case ) what are her options. is it not too late once funds have been disbursed from the deceased to the non beneficiary made payable to her and she can not do the rollover . what are her options? she is looking to do a life expectancy payments. is that possible?
Permalink Submitted by Jose Morales on Wed, 2009-02-11 16:57
This seems to be a case where words make a world of difference. A non-spouse does not have the option to complete a Rollover from an IRA account of which they are the beneficiary. If this person asked for a distribution then there are no options available to them at this point. The distribution must be reported when they file their tax forms for whatever tax year in which the distribution was taken.
The time to discuss her options was before she took a distribution, which unfortunately seems to have passed.
Permalink Submitted by Alan Spross on Wed, 2009-02-11 19:22
I agree, there are no options to nullify the distribution.
However, in the way of damage control, if the daughter has earned income, she can use the distribution to subsidize a maximum IRA contribution, either a deductible TIRA contribution or if she is not eligible for the deduction, perhaps a Roth IRA contribution. And if she is a participant in a QRP, she can increase her deferrals. For IRA contributions, at this time of year she can contribute for both 2008 and 2009.
All of these potential solutions would serve as partial surrogates for the actual rollover that she cannot do.
She should also check to see if the IRA owner had any basis in the IRA, be checking for Form 8606 on previous returns. If so, part of her total distribution will be tax free.
Note: Responsible custodians could at least warn beneficiaries that non spouse rollovers are not allowed. Most such custodians should be happy to retain assets in the current financial environment.