Inherited IRA Problem
A client changed custodians and transferred 2 IRA’s into the new account; however, one of them happened to be an inherited IRA. They both went into one IRA by mistake. Considering the rollover of an inherited IRA for a non-spouse beneficiary is prohibited, does anyone have a recommendation on how this can be corrected? To further muddy the waters, trades were made in the new IRA account after the assets were received by the new custodian. The original inherited IRA was properly titled with the name of the deceased; however, the deceased’s name was truncated in the title so it was not obvious that it was an inherited IRA. We’re hoping there is a way to segretate the assets and transfer the amount that should have been in the inherited IRA to a properly titled account. Any suggestions? Thank you.
Permalink Submitted by Alan Spross on Wed, 2010-02-10 00:24
There is some precedent to correct these registration problems as long as an actual distribution has not occurred as would be reported on a 1099R. However, this obviously cannot be fixed without the flexibility and cooperation of the new IRA custodian, so an appeal to partition this IRA into two accounts by a supplemental transfer should be started at Sr. levels with the custodian since most Reps will never have dealt with this issue.
This is going to be tougher if this happened last year and a 1099R has been issued, but it appears there would be no 1099R unless someone caught this error with the new custodian and manually triggered one.
Here is an article quoting Ed that appeared in the WSJ on this subject:
http://online.wsj.com/article/SB125512471450876777.html