Beneficiary IRA
Client died in Dec 2014. 5 adult children named as beneficiaries. Custodian is telling me that if the children want to keep the money in beneficiary IRAs, they have to set up accounts at the current custodian in the beneficiary IRA name, transfer the money from mom’s IRA to that account, and then they can move the money anywhere they want to.
Is that correct? Custodian is telling me that is the law.
But it’s a lot of paperwork to set up 5 new accounts, for fairly small dollar amounts, only to have them immediately transfer the money out, and then the beneficiaries are going to get hit with annual maintenance fees and account closing fees when they transfer the money out.
Do I have any options to argue with the custodian about?
Thanks.
Richard
Permalink Submitted by Alan - IRA critic on Wed, 2015-01-07 21:09
In order to even respond to inquiries, the beneficiaries must provide a death certificate copy and their SSNs, addresses etc or the IRA just remains frozen. Most custodians will then establish separate accounts for each beneficiary because the original IRA can only have one tax ID, not 5. In addition, a TtoT transfer must be done between identically titled accounts, so an IRA still in the name of the deceased owner cannot be transferred to an inherited IRA at another firm. Beneficiaries might try to negotiate a fee waiver with the current custodian considering the possibility of both small account fees and exit fees. Perhaps some beneficiaries will just want a lump sum if their shares are small enough. Note that client’s year of death RMD must also be completed if not done prior to client’s passing. Useful article here: http://www.morningstar.com/advisor/t/83651808/titling-the-inherited-ira.htm