Does this distribution need to include the word “IRA” anywhere on the check or stub?

Submitted by Cheryl Van Beek on Sun, 2016-12-04 15:03

IRA brokerage account has now been transferred due to death as an Inherited Traditional IRA . Just prior to transferring to the inherited IRA, an IRA distribution to the sole Non Spouse beneficiary was made. The attached stub (not the check) lists the Transaction Type as “Death Distribution from Decedent Account,” check # and gross & net amounts. The check is issued to the beneficiary and shows the net amount, part of the account # (of decedent account because this first distribution was one that wasn’t taken by decedent in year of death) and says, “From an Account holder of [Custodian’s Name]. There is no mention of “IRA” on either the stub or check. hope this is okay. Does this distribution need to include the word “IRA” anywhere on the check or stub? Also, will future distributions from the new Inherited account to the beneficiary need to include the word “IRA” anywhere on the check or stub and is it okay if they continue to say “Death Distribution?”



Submitted by David Mertz on Sun, 2016-12-04 17:30

  • [Edit] I now think that this answer does not apply.  See my reply below.
  • “The check is issued to the beneficiary…”  In particular, was the check made out in the name of the beneficiary, or was it made out to the new financial institution for the benefit of the beneficiary?  If it was made out to the beneficiary personally, it was a distribution that is not eligible for rollover since the beneficiary is a non-spouse.  An IRA inherited by a non-spouse beneficiary can only be moved by trustee-to-trustee transfer, and a check made out only in the name of the beneficiary does not qualify as a trustee-to-trustee transfer.
  • Is the net amount less than the gross amount?  If so, this suggests that some amount was withheld for taxes, again implying that a distribution ineligible for rollover was made.  There is no reason to withhold taxes from a trustee-to-trustee transfer.
  • A trustee-to-trustee transfer is non-reportable because it is neither a distribution nor a rollover.  If the brokerage firm will be reporting this by issuing a code 4 Form 1099-R, it indicates that a distribution ineligible for rollover by a non-spouse beneficiary was made.
  • If this was indeed a distribution to the beneficiary ineligible for rollover, the amount now in the Inherited Traditional IRA is an excess contribution which needs to be removed and the distribution cannot be reported as having been rolled over.
  • If a request was made for a trustee-to-trustee transfer and the brokerage instead made a distribution to the beneficiary, the beneficiary may have a legal case against the brokerage.

Submitted by David Mertz on Sun, 2016-12-04 18:22

I think I misunderstood the question.  I took it to mean that a payment made to the beneficiary was rolled over, but after reading Alan’s reply, it does now seem that the distribution to the beneficiary was separate and only the remainder of the account was later transferred to the Inherited IRA by trustee-to-trustee transfer.  Sorry for the confusion.

Submitted by Alan - IRA critic on Sun, 2016-12-04 17:56

Perhaps the transfer to an inherited IRA was done correctly and the prior distribution check was limited to the year of death RMD not completed by the decedent. The only critical element placed on a distribution check is the correct name of the beneficiary, but the inherited IRA account must be properly titled showing the names of both the decedent and the beneficiary, or the beneficiary entity if the beneficiary is a non individual.

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