Inherited Minor IRA transfer
A current client’s mother passed away recently. Her IRA (not with us) named his two, minor, daughters as beneficiaries. The current custodian does not open Minor Inherited IRAs. The thought is to open two Minor Inherited IRA accounts with us, and have the current custodian make the distribution checks payable to “Charles Schwab and Co. Cust. FBO Jane Doe Inh. IRA”. I know that Inherited IRAs do not have a 60 day rollover option. Will this be ok to count as a custodian to custodian transfer and therefore not trigger a taxable event? Does it matter if the checks are mailed directly to Schwab or mailed to the client and then forwarded onto Schwab?
Thanks for your help.
Permalink Submitted by Alan - IRA critic on Tue, 2016-02-16 17:32
This is allowed, but they are not distribution checks. Checks made out as indicated are considered non reportable TtoT transfers regardless of where they are mailed. Be careful when completing any form that indicates a distribution for a non spouse inherited IRA because an actual distribution check made out to the beneficiary is taxable and cannot be fixed. Again, checks with the correct payee format in your example can be mailed to the client and forwarded to Schwab. You may also encounter state laws affecting the responsible person to have control of the inherited IRA until the minors reach majority. Schwab should be able to assist in this respect.