Multiple Inherited IRAs
Using the beneficiary stretch option to ultimately consolidate all funds into one inherited IRA for each beneficiary. Problem – deceased client left two variable annuity iras (different insurance companies) to his two daughters. We have created an inherited IRA account for each beneficiary and desire to do a trustee-to-trustee transfer from each annuity company to the our custodian NFS. The custodial account is titled as an IRA BDA for each beneficiary. How should the annuity companies distribute the funds lump-sum or trustee to trustee. If lump sum is the only option how should the check be titled?
Permalink Submitted by Alan Spross on Tue, 2012-02-28 22:35
The only option to change custodians for a non spouse inherited IRA is by trustee to trustee transfer. Any check made out to the beneficiaries cannot be rolled over and will be irrevocably taxable. The checks can be mailed to the beneficiaries for delivery to the new custodian, but they must be made out to “NFS FBO (beneficiary name) inherited IRA”. It is most efficient to intiate the transfer through the new custodian, ie the new custodian orders the transfer from the present custodian.
If each daughter was named on each IRA annuity as beneficiary, it is OK to combine the interest of each into one new inherited IRA as long as both accounts were inherited from the same decedent and the RMD divisor will be the same. In other words, if a beneficiary wanted to use the 5 year rule on one account but stretch the other one, then they should not be combined. Or if the separate account from one annuity was created before the end of the year following the year of death, but the other one missed that deadline, then the divisors would be different and they should not be combined.
The vital issue is that the insurance company NOT issue a check made out to the beneficiary name only.