estate vs inherited IRA
An individual came to me after his sibling’s death where the estate of his deceased sibling was the default beneficiary of the IRA. After submitting the death claim, etc., the IRA custodian will now distribute the proceeds under the tax ID # and tax rate of the estate. This is their default and cannot/will not “transfer” the IRA to an inherited IRA “owned ” by the brother who happens to be the 100% beneficiary of the estate. Is there a gray area here with the IRS? Are you aware of IRA custodians who take a “bolder” approach and would allow a transfer from an IRA in the name of the estate to an inherited IRA (still “under” the deceased name and still subject to distribution in the five year rule) ?
Permalink Submitted by Jose Morales on Fri, 2011-12-02 16:41
What I can say is that there are custodians that will pretty much do anything you want them to do, either because they have a very good understanding of these issues or because they completely do not understand and just want to keep clients happy. If you don’t like the policy of this custodian, find another that you like and have the funds transferred to that custodian first, then do as you wish.
Permalink Submitted by Alan Spross on Fri, 2011-12-02 17:57
Here is an article on this issue. Basically, you can find a custodian who will do this if you search them out, then transfer the IRA accounts by direct trustee transfer to the new custodian:
http://www.ataxplan.com/bulletinBoard/ira_providers.cfm
Permalink Submitted by John Worrel on Fri, 2011-12-02 19:42
Thanks for the information!