Death occurs before account is opened
An IRA owner transfers his account from his bank to a new bank for a higher rate. The account/money is
wired to the new bank, but before he can get to the bank and sign the adoption agreement /new account
paperwork he passes away.
Several months pass until his nephew( primary bene on account at original bank) contacts bank holding the IRA.
He sends a short cert. and original death cert. and asks to open beneficiary IRA account. Bank states that they
cannot and want to send the account back to the original bank – only the original bank won’t accept it back.
Anyone ever run into anything such as this??!!
Permalink Submitted by Alan Spross on Thu, 2009-10-08 20:28
The place to start is with federal and state laws regarding wire transfers including rejection procedures. It seems to be that if rejection procedures apply, the first bank has no choice but to accept the funds back. The decedent never requested a distribution either. If beneficiary cannot get the two banks to agree to an acceptable solution, he may have to retain legal assistance.
Permalink Submitted by [email protected] on Sat, 2009-10-10 15:45
Thank you for your advice. The attorney is asking the bank to transfer the IRA into yet another bank in the hopes that
this can be resolved without causing a taxable event in the current tax year. He asked how the check should be made out,
and to be honest I’m not sure!
Since the owner is deceased should it be the estate of Mr. ABC? And the beneficiary would also be the estate!?
I’m open for your input.
Permalink Submitted by Alan Spross on Sun, 2009-10-11 01:58
The check cannot be made out directly to a non spouse beneficiary unless the beneficiary wants to cash out the IRA. A non spouse beneficiary cannot do a rollover, and can only change IRA custodians by a direct trustee transfer of the account.
Therefore, he would have to set up an inherited IRA, often known as a BDA (beneficiary designated account) to receive the funds. The original bank would then transfer the funds to that account or make out a check to the new custodian “FBO (name of beneficiary) as beneficiary of (name of decedent)” and have it delivered via the beneficiary to the new IRA custodian.
The estate would not be the recipient of the funds in any event if a specific individual is named as beneficiary on the IRA agreement.
Permalink Submitted by Bruce Steiner on Tue, 2009-10-13 02:11
It may be possible to get an extension of time to complete the rollover. Under Section 402(c)(3), the IRS has discretion to waive the 60-day deadline. Rev. Proc. 2003-16, § 3.02(2), gives death as an example of a fact and circumstance that the IRS will consider. However, in PLR 200415001, the IRS did not grant an extension in the case of an IRA owner who died before completing the rollover.
It may be worth consulting with counsel as to whether to seek an extension of time to complete the rollover.