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Question on non-spouse inherited IRA rollover/transfers

A relative of mine has just inherited a share of a trad IRA and a Roth IRA from her father. The IRAs listed her and her sister as 50/50 beneficiaries. I'm trying to make sure my relative (the decedent's daughter) doesn't get hosed on this... She's contacted her late father's financial advisor (who works with American funds -- her dad's trad and Roth IRA accounts are with American). The advisor is trying like heck to discourage my relative from transferring her share of the inherited IRA to an inherited IRA account at Fidelity (which is where all her other investments are kept). Anyhow, after finally and politely getting the advisor to admit defeat, he said she could do a "60-day rollover" to get the money into the inherited IRA account at Fido. She has NOT signed off on that yet. I am under th impression that this could not be done -- if a check made payable to her is sent, it'll (a) all be taxable income (except from the funds from the Roth), and (b) it will not be able to be put back into inherited IRA accounts. In other words, only a direct trustee-to-trustee transfer will do the trick (which could involve a check, as long as the check is made out to "Fidelity FBO [whatever]" and not to my relative). Is my understanding correct?

And if so, could you point to pubs/regs/IRC that states this, so I can give that reference to my relative so she can in turn quote it at the advisor. Thanks!

-- Rich Carreiro snipped-for-privacy@rlcarr.com

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Reply to
Rich Carreiro
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Yes.

Forget about the 60-day rule.

A direct transfer from the old account. 50% of the old account should go into a new account titled "Jane Doe as beneficiary of John Doe IRA" and she would take distributions based on her age and add "1" to the Pub 5 table denominator every year.

-- ArtKamlet at a o l dot c o m Columbus OH K2PZH

Reply to
Arthur Kamlet

Sec. 829 of the Pension Protection Act of 2006 added Sec.

402(c)(11) to Title 26. See IRS Notice 2007-07 for details and a Q&A. A direct trustee to trustee transfer is required. Especially read Q&A 14 which states that a plan does not have to offer this option.
Reply to
A.G. Kalman

Rich,

The section on "inherited IRAs" in publication 590 covers what you need. I believe the AF guy is confusing non-spouse and spousal IRA inheritance. I haven't looked at 590 in a while, but I believe spousal inheritance allows for rollovers, but non-spousal IRAs only allow for direct trustee-to-trustee transfers. The reasoning is thus: a IRA inherited from a spouse can be treated as your own, with all the same benefits extended to the original account owner. A non-spousal inherited IRA CANNOT be treated as your own. No further contribs can be made, no rollovers are allowed (except DT2T), and you are subject to the numerous distribution rules (which vary depending on whether the decedent had reached the required beginning date or not).

Reply to
kastnna

Wrong reference. This provision has to do with 401(k) non-spouse beneficiaries, who previously had no transfer ability and stricter distribution timeframes. The OP has to do with IRAs, which have had more liberal treatment for non-spouse beneficiaries for some time and, AFAIK, are mandatory for the "losing" custodian.

-- Phil Marti Clarksburg, MD

Reply to
Phil Marti

This is a plain old IRA with named beneficiaries, not a qualified plan.

-- Rich Carreiro snipped-for-privacy@rlcarr.com

Reply to
Rich Carreiro

Whoops.... missed the point of inheriting an IRA rather than a retirement plan. So... my answer is only correct if one inherits a retirement plan. Then, a trustee to trustee transfer is required to get the funds into an IRA.

Reply to
A.G. Kalman

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