I recently participated in a Bankers Online training session regarding distributions from IRA. In that training, done by Laura Wilson, she repeatedly talked about opening a "pay out" account when the owner of the IRA is deceased rather than cutting a check directly to the beneficiary. We currently do a death distribution to close the IRA rather than opening another account for the beneficiary. We think this is handling the IRS requirements but I wanted to know what others do. Did anyone here participate in the same training? Thanks for the help!

Are you saying that you "do a death distribution to close the IRA" no matter what? Or do you only do this when the beneficiary asks you to?

I did not participate in this training but I think the answer is at least partially dictated by what your core processing system can handle.

If a beneficiary wants to take a full a distribution by the 12/31 of the year of the IRA owners death I do not have to open a pay out account. I can cut a check or checks from the original account as long as I use the special codes required by our core system. As long as I properly input the beneficiary information the core system can do all of the tax reporting on the account properly.

If the beneficiary wishes to keep the account open after that year and spread out the payments over time I have to open a pay out account in order for all the tax reporting to be correct.

Kitty,

What type of acccount do you open to handle the payments over time? Thanks for the response.

We can set up an IRA on our system as either a Savings Acccount or a Certificate of Deposit. Most beneficiary accounts are Certificates of Deposit because the beneficiary has decided to leave the money and only withdraw the minimum amount required. Our system can automatically withdraw the RMD amount only from the account without charging a penalty.

Kitty,

Thanks for the response. You don't set up the beneficiary account as an IRA - with IRA paperwork - but as a savings or CD account with those normal account disclosures?
Thanks!

They are set up as beneficiary IRA's. Our core processor has special codes that go on the account in this instance so that RMD's can be correctly calculated. We do not provide these customers with an IRA Plan Agreement.