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Posted by Bill on July 18, 2007, 5:12 am
Please log in for more thread options rlc-news@rlcarr.com (Rich=A0Carreiro) posted:
> 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.
> =A0=A0In 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?
Yes, I believe so.
> 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.
Simply by visiting the irs website --
[from http://www.irs.gov/publications/590/ch01/]
-- you can copy the following:
<snip>
Inherited from someone other than spouse. =A0=A0If you
inherit a traditional IRA from anyone other than your
deceased spouse, you cannot treat the inherited IRA as your
own. This means that you cannot make any contributions to
the IRA. It also means you cannot roll over any amounts into
or out of the inherited IRA. However, you can make a
trustee-to-trustee transfer as long as the IRA into which
amounts are being moved is set up and maintained in the name
of the deceased IRA owner for the benefit of you as
beneficiary. =A0=A0Like the original owner, you generally
will not owe tax on the assets in the IRA until you receive
distributions from it. You must begin receiving
distributions from the IRA under the rules for distributions
that apply to beneficiaries.
<snip>
That seems pretty definitive. There is a cross reference to
other sections regarding calculations for the RMD (Required
Minimum Distributions), which, for a beneficiary other than
spouse, can mean determining life expectancy for the
year-following-death, and thereafter, so even a younger
person could be forced to take RMDs at age 53 (in one
example) -- which, logically, is the reason for not
permitting any "rollovers" which might blur the status and
mingling funds with the beneficiary's IRA.
But your friend or you can easily review the entire Pub 590
-- either online (as I just did) or by downloading pdf or
arrange to get a hard copy from IRS.
Bill
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