transfer of an inherited IRA.

Submitted by Michael Seese on Wed, 2019-10-23 21:04

I have a question pertaining to a transfer of an inherited IRA from one Custodian to another Custodian.

Original IRA owner – Father
Bene of original account holder – Daughter
Bene of the Daughter’s inherited IRA is her – Brother

Father passed away and daughter inherited account. Daughter passed away after inheriting IRA account. The daughter named her Brother as bene.

Current Custodian has account titled as Inherited IRA in Daughter’s name – FBO Brother
New Custodian that we are transferring to says account must be titled as Inherited IRA Father – FBO Brother.

Neither Custodian will budge because they both feel they are correct. Who is right and what to do next?



Submitted by Alan - IRA critic on Thu, 2019-10-24 00:32

The IRS is not overly particular, but they have indicated that in the case of a re-inherited inherited IRA they prefer the title shows the new beneficiary as beneficiary of the first beneficiary. In this case that would be “brother as beneficiary of daughter”. Most custodian’s processing platforms cannot support a title showing the original owner, first beneficiary, and next beneficiary. Is this issue impeding the transfer?

Submitted by Michael Seese on Thu, 2019-10-24 12:32

YES.  Current Custodian will not release funds to Accepting Custodian due to differences in registration. Neither custodian is able or willing to change the registration to allow them to match.

Submitted by Alan - IRA critic on Thu, 2019-10-24 15:20

  • The new custodian should be  made aware of the IRS Form 5498 Inst., p 20 as copied below.
  • “In the case of successor beneficiaries, apply the preceding rules by treating the prior beneficiary as the decedent and the successor beneficiary as the beneficiary. Using the example above (Brian Willow as beneficiary of Joan Maple), when that account passes to Brian’s successor beneficiary, Maurice Poplar, Form 5498 and the annual statement for Maurice should state “Maurice Poplar as beneficiary of Brian Willow.” The final Form 5498 and annual statement for Brian Willow will state “Brian Willow as beneficiary of Joan Maple” and will show the FMV as of the date of Brian’s death or year-end valuation, depending on the method chosen.”
  • If still a problem appeal to higher level at new custodian, consider another custodian, or if the beneficiary has other accounts with the new custodian, consider using them as leverage. 

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