Titling Of An Inherited IRA
Answer by Ken Golliher, BOL Guru Guru Bio
Question: We need clarification as to how to handle the titling of IRAs after the owner has died and the beneficiary is electing to take distributions from the IRA instead of closing it out and treating it as their own. In the past, we completed the Election of Beneficiary Form for IRS reporting. The confusion comes in because some think the IRAs "must be closed out" and I don't think that is necessarily true. I think in some cases they just need to be retitled, especially in situations where, for example, a spouse would elect to take life expectancy payouts.
Answer: There is a longstanding IRS Revenue Procedure that controls the titling of an inherited IRA. For example, the correct title would be Jane Doe, Beneficiary John Doe IRA. (Jane's SSN would be tied to the account.) Begrudgingly, I would acknowledge that some banks do simply file maintenance the name, address and TIN fields to effect the change. This saves a little work, but eliminates an audit trail, assumes the beneficiary cannot name a beneficiary, and can cause information-reporting problems if both the decedent and the beneficiary make withdrawals from the account in the year of death.
The preferred practice is to set up a properly titled new account, allow the new owner to name a beneficiary (check state law on this point) and transfer the funds from the decedent's account to the beneficiary's account. The transfer is not subject to information reporting. All distributions coming from the beneficiary's account are "distributions due to death."
BankersOnline is a free service made possible by the generous support of our advertisers and sponsors. Advertisers and sponsors are not responsible for site content. Please help us keep BankersOnline FREE to all banking professionals. Support our advertisers and sponsors by clicking through to learn more about their products and services.
Print Friendly!
Email This Article!
Discuss NOW!
