Inherited IRA; Rollover & Trustee Transfer

Submitted by Ed Farmer on Tue, 2014-12-30 21:05

We have a client who was listed as the direct beneficiary on her Mother’s IRA Annuity. Mom died. Client submitted claim forms, received a check, deposited the check into a bank account. We have attempted to establish an Inherited IRA account for her but are being told since she deposited the check she cannot open an Inherited IRA account…she should have had the death claim check sent directly to an Inherited IRA account. This would have been seen as a Trustee-to-Trustee transfer.

If this is true then the client has a significant tax bill coming due.

Does all this makes sense? Does our client have any options?



Submitted by Alan - IRA critic on Tue, 2014-12-30 22:09

  • No options unless she has a case for damages against the insurance company. However, if a distribution rather than a transfer was requested, the error was hers. This happens far too often as it is the most costly error IRA beneficiaries tend to make. She probably checked the distribution box on the form, but if it can be proven that she did not, she may have a case. There is nothing she can do with the IRS unless there are extremely unusual circumstances, such as the one reported in this article:  http://www.morningstar.com/advisor/t/66167738/distributions-and-undistributions.htm?&ps=9
  • If the link does not work, I think you can set up a free user name and password for Morningstar


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