Beneficial IRA Procedure
I have a client who was the son of an IRA owner and received a check made out to him personally. Seems like once this event occurs, the entire distribution should be taxable and he has lost his right to Stretch.
He claims his sister, another benficiary with the same circumstances, asked the IRA provider to “void” the check and re-issue as a Beneficial IRA. Could a custodian un-do this distribution?
Permalink Submitted by Denise Appleby on Tue, 2009-05-19 21:31
[quote=”steven.p.ross”]I have a client who was the son of an IRA owner and received a check made out to him personally. Seems like once this event occurs, the entire distribution should be taxable and he has lost his right to Stretch.
He claims his sister, another benficiary with the same circumstances, asked the IRA provider to “void” the check and re-issue as a Beneficial IRA. Could a custodian un-do this distribution?[/quote]
Hmmmm—question of the day. Could a custodian do that? Yes.
Should they? It depends.
Technically, if the distribution was made because the beneficiary requested the amount, the custodian should not reverse the transaction. However, if the check was issued because of an error or oversight on the custodian’s part, then they are required to void the check and reverse the distribution.
Maybe – in the sister’s case- the custodian automatically issued the check upon learning of the death of the IRA owner; and the terms of the IRA agreement did not provide for such distributions without the beneficiary’s written permission?
He should ask his sister if she knows why the custodian agreed to reverse the distribution. There must be a good reason and we can take it from there to see if it can be applied to his case..