INherited IRA Question

Submitted by Vickie Intriago on Thu, 2023-11-02 19:21

Hello,
Client’s mother passed away and had an IRA at her local bank . I have opened an Inherited IRA account so that the funds can be transferred to this account. Does the bank have to change the registration to an inherited Ira at the bank before it gets directly transferred to the account with me?
Can it rollover over from IRA ( mother) at bank to Inherited IRA FBO of son with the new custodian which is Pershing.



Submitted by David Mertz on Thu, 2023-11-02 20:01

  • The inherited IRA is not permitted to be moved by rollover.  It is only permitted to be moved by non-reportable trustee-to-trustee transfer.  The form that the bank uses to move the funds should allow the destination account to be specified which could either be at the current custodian or some other custodian.  Since banks representatives are notorious for messing this sort of transaction up, make sure that the form is marked to indicate a transfer, not a reportable distribution, not a rollover.
  • For example, banks often use a withdrawal form provided by the company Ascensus.  The Ascensus form that I have experience with has in Part 4 as a Withdrawal Reason choice 1 that would be the one to mark to indicate “Transfer to Another IRA.”  Do *not* allow the bank using this form to use Withdrawal Reason 4, Death Withdrawal by a Beneficiary, as doing so would result in a Form 1099-R reporting a distribution that cannot be put into another inherited IRA (although one could dispute the Form 1099-R if the payment was properly made directly to the new inherited IRA and not to the beneficiary, but it’s best to avoid this hassle).  Part 7 of this form allows one to specify that the Payment Method is to be by check to be made payable to a particular receiving IRA which can be at another custodian.  It’s common for the bank to then provide that check to the beneficiary for delivery to the new custodian.


Submitted by Alan - IRA critic on Thu, 2023-11-02 20:44

Q 1 asks if the bank must set up an inherited IRA at the bank before doing a direct transfer to the inherited IRA  set up at another custodian. In most cases the answer is yes, not because of IRS rules but rather internal processing procedures of the custodian.



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