willardx wrote:I have a sensitive question, not sure how prevalent it is, so I would appreciate any feedback:
4. I have been working with VG to transfer all funds into new accounts, including moving the IRA funds to 2 beneficiaries, which was taking a long time.
Just want to ask a few questions confirming the proper naming of these new beneficiary accounts (assuming you wish to "stretch" MRD's using new IRAs).
If a spouse is one of the beneficiaries, then IRA funds can be transferred to a new IRA in the spouse's name. This might not be the smartest move from a tax planning perspective, but it is allowed. The IRS will not treat this as a withdrawal.
But if any other type of IRA beneficiary (i.e. a non-spouse beneficiary) transfers inherited IRA funds into an account in their name, the IRS will ultimately treat it as a complete withdrawal and expect all taxes to be paid for the year of transfer. Sorry, but that's just the way it is
Instead, non-spouse beneficiaries should transfer IRA funds into an account titled roughly as follows: Deceased Person IRA (deceased Month, Day, Year), F/B/O/, Recipient Name, Beneficiary
Say the deceased was named Roberta Smith, she died on May 12, 2003, and the beneficiary is named James Smith (her son). The new IRA should be titled: Roberta Smith IRA (deceased May 12, 2003) F/B/O/, James Smith, Beneficiary
So while you'll dealing with this messed up MRD, also make sure that the new IRA accounts got titled correctly!
My "go to" reference person for all things involving IRA inheritances is Ed Slott. If you want to explore this topic more, get a copy of his book, "The Retirement Savings Time Bomb... and How to Defuse It
Investment skill is often just luck in sheep's clothing.