Owner vs. Annuitant on an Inherited IRA Annuity
I’m doing a direct trustee to trustee transfer of 1. an inherited IRA and 2. a Succcessor Beneficiary inherited IRA from a bank product to an Annuity. The Annuity application has a space for an annuitant and the owner. As far as titling, I assume the annuitant section of the APP should be Jane Doe with no reference to being a beneficary, but should the “Owner” section of the annuity APP be titled as the follows:
1. Standard Inherited IRA Owner – Jane Doe as beneficiary of John Doe?
2. Successor Beneficiary inherited IRA Owner: Jane Doe as beneficiary of John Doe? – this is based on the instructions of the current edition of the 1099R/5498 Inst on Page 16.
Also, do the transfer checks actually need to reference that the money is for an inherited IRA or is that handled when I fill out the inherited IRA distribution election form for the new annuity? One of the checks is made out to the new company but it references FBO: Jane Doe, with no mention of the inherited IRA on the check or Jane Doe as Beneficiary.
Permalink Submitted by Alan Spross on Thu, 2012-04-19 17:27
I assume that John was the owner of one IRA and the designated beneficiary of the other. If so, your reflection of the p 16 Inst. appears to conform best to the 5498, but the insuror’s processing platform may be set up for another variety, such as showing the decedent first. Either should be OK and not result in IRS issues.
However, combining these two IRAs into one inherited annuity is not advisable since they have different RMD divisors (Jane’s LE for one and continuing John’s non recalculated expectancy for the other). It is not clear what the IRS would do if Jane combined the two and used the smallest divisor (largest RMD distribution) of the two for the new account. That would appear to be the most logical solution, but for the record when the IRS Regs allow inherited IRAs to be combined if inherited from the same decedent, that means the same original owner.
It would be better if the transfer checks were made out to “Jane Doe Beneficiary IRA” or similar, but the more critical issue is making sure that neither existing custodian issue a 1099R. You might also ask the insuror if the current check format is acceptable for them as funding for the inherited IRA annuity.