Inherited IRA
Hello,
I have read lots of information from Ed Slott regarding titling of Inherited IRA’s.
It is my understanding that in order to preserve the ability to stretch IRA distributions, the account title must indicate the IRS is inherited by use of the words “beneficiary” or “inherited.”
For example: “Jane Smith, Deceased (Date of Death), IRA FBO Mary Smith, Beneficiary.”
I have checked a firm that custodies through T.D. Ameritrade. According to them, TDA registers the account as follows:
Client’s name Bene James Ball Bene
Decedent’s name DECD CNT IRA Jasper Ball DECD CNT IRA
Traditional Bene IRA Traditional Bene IRA
I was told that date of death is not included in the registration of T.D. Ameritrade, Fidelity or Pershing and that, based upon the fields being completed on the Inherited IRA application, T.D. Ameritrade will title the account correctly.
I just want to confirm that the above is acceptable with respect to titling of the Inherited IRA so that stretch payouts would be permitted.
Thank you.
Jason
Permalink Submitted by Alan Spross on Mon, 2012-10-08 17:25
The DOD does not need to be included. The IRS is flexible as long as the names of both decedent and beneficiary are shown and identified as such.
Many variations reflect the operating procedures of the IRA custodian, and if a problem surfaced in the titling the custodian would find out soon enough. An error can be corrected and does not automatically create a taxable distribution.
Recently, there have been more questions regarding the inheriting of an already inherited IRA. In that situation, the platforms of many custodians will not support naming all 3 parties. The IRS prefers that the original IRA owner’s name can then be dropped leaving the names of only the original designated beneficiary and the successor beneficiary.
Permalink Submitted by David Hochstadt on Thu, 2012-10-11 16:10
Thank you, Alan.
I know this is a sensitive topic in terms of the IRS not allowing any mistakes in order to preserve the stretch our of distributions. Having read lots of literature on this matter over the years from Ed Slott, perhaps I was under the wrong impression that the date of death needed to be included (versus it being optional whether it is included in the title or not).
I assume that obtaining from the custodian in writing their titling of an Inherited IRA, reviewing this is correct and also confirming this with one’s accountant and/or attorney, sending a cover letter in to the custodian along with the applicable completed Inherited IRA paperwork specifying the nature of the account and what needs to be included in the title along with conducting a trustee-to-trustee transfer of assets should cover all the bases in terms of ensuring this is done correctly and having supporting documentation confirming what should be done (in the unlikely event the account titling is done incorrectly).
Thank you.
Permalink Submitted by Jose Morales on Thu, 2012-10-11 16:53
Just to save you a lot of frustration, you may find that many IRA Custodians will not be very receptive to having the titling of their accounts dictated to them by a potential client (or even existing client). If you are dealing with a financial institution that has held IRA accounts for many years, trust me when I say that they most likely already have their procedures for titling inherited IRAs already set. If being in absolute control over how this account is vested is mandatory for you, then you are going to find your options very limited when it comes to finding someone willing to bend to your will.
Permalink Submitted by David Hochstadt on Thu, 2012-10-11 17:48
Hello,
I think you are completely mistaken when you write I am looking for “someone willing to bend to your will.” Not sure where you came up with that one; I just was trying to confirm matters having read a lot on this topic from Ed Slott. No one is looking to “dictate titling of accounts to a potential client”; once again, I have no idea where you are coming from.
But thanks anyway.
Permalink Submitted by Alan Spross on Thu, 2012-10-11 18:24
I agree that institutions have their own inherited IRA title regimen, and often it is based on their data processing platform.
The best approach is to have your information available, ask them how they wish to title the account, then confirm that the following is included:
1) Name of beneficiary and identification as beneficiary
2) Name of deceased owner and identification as decedent
If they want the DOD, provide it.
Some firms will include phrases such as “inherited IRA” or “BDA” or FBO to further identify the type of account ownership. If an inherited Roth IRA, that should also be included.
The order in naming the beneficiary and decedent is not important as long as each is clearly identified. I agree that the TD Ameritrade format appears unnecessarily cluttered, but there are probably reasons their legal Dept requires that format.