Dad named his revocable trust as beneficiary of his bank IRA, bank plans to give heirs check made payable to the trust

Submitted by Delia Fernandez on Tue, 2023-12-05 02:51

Dad had reached his RBD and was taking RMDs, passed away in January 2023, grown children are all designated beneficiaries. Dad took his 2023 RMD before he died.

The heirs are my clients. Initially it appeared that the bank would bypass the trust and instead distribute the IRA to Inherited IRAs at the bank for the five children, so they asked all of the children to complete inherited IRA applications. Instead, the bank told them today that they had closed dad’s IRA and would issue a check payable to his revocable trust.

What should the heirs do now? Can they open a trust account for the decedent and deposit the check? I’d appreciate any guidance you can give me. TIA for your help.

Delia Fernandez, MBA, CFP



Submitted by David Mertz on Tue, 2023-12-05 03:27

  • A check made payable to the trust is not permitted to be deposited into another inherited IRA.
  • Unless the bank’s IRA agreement dictates that under the circumstances a distribution from the inherited IRA must be made, by issuing the check the bank will have made an unauthorized distribution and the trustee of the trust might have a legal case against the bank.  Every effort should be made to stop the bank from making any distribution before the proper course of action can be agreed upon.  With no requirement in the IRA agreement that a distribution be made under these circumstances, the trustee of the trust can request that the inherited IRA be transferred custodian-to-custodian to an inherited IRA for the benefit of the trust at another financial institution that will be more accepting of a request to transfer the trust beneficiaries’ respective shares to separate inherited IRAs for the benefit of the beneficiaries of the trust.  A check for a custodian-to-custodian transfer of an inherited IRA needs to be made payable to the new inherited IRA at the new custodian, not made payable to the trust.

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