Brother died with no beneficiary on his IRA. The IRA is now in his estate as an Inh IRA. Estate is processed via court in Florida. Can the Inh IRA transfer to beneficiaries (brothers and sisters) if they setup a Inh IRA? Does IRS allow taxing beneficiaries?
Thanks, Jim Johnson
Surprising that Schwab would not cooperate, but no IRA custodians really like inherited IRAs because they are a wasting asset. Also, the more beneficiaries the more paperwork and estate litigation exposure there is. Perhaps the executor should call again and ask to be connected to the estate or beneficiary specialists since the first rep may not have understood the request. Sometimes a letter from the estate attorney can convince custodians to accept assignment. I don’t think Schwab has a blanket rule on this either like some banks have.
Appreciate your responses. Schwab says they need a court approved request and I am not sure how to word this to the court since this is not a typical request. Jim J
Are you the executor or personal representative? Perhaps the probate court is required to grant you permission to distribute the inherited IRA out of the estate to the estate beneficiaries and Schwab wants to be sure they have approved this. The executor’s job is to disperse the assets to beneficiaries but only after all the estate bills have been paid. As such perhaps the court will want creditors of the estate paid before allowing the IRA to be assigned out of the estate.
Yes, I am executor. Schwab wants no resposibility for a wrong distribution. From what you have clarified the IRS should have no problem so I plan to request the court to allow the estate Inh IRA to distribute to the beneficiary Inh IRAs. Thanks for your help.
Permalink Submitted by Alan - IRA critic on Tue, 2023-02-14 17:07
The executor has the authority to assign the inherited IRA out of the estate to the estate beneficiaries under the will or even to intestate beneficiaries. Most custodians will cooperate with assignment, but there are also some that will not. Assignment does not alter the RMD divisors, it just provides the beneficiaries with full control over their inherited IRA. The 5 year rule applies if brother passed prior to RBD, and his remaining LE if he passed after RBD. Taxable income is reported by the beneficiary recipients on all distributions.
Permalink Submitted by James Johnson on Tue, 2023-02-14 20:01
Why ould a custodian (Schwab in this case) not cooperate with request from executor?