Inherited My Dad's IRA and His Financial Advisor. Please Help

[Comic630]

Hello Bogleheads,

This is my first post on the forum and I know VERY LITTLE about investing, so please take it easy on me.

My father passed away a few weeks ago and I inherited his IRA. He had an trust, I signed papers, and now I have a beneficiary IRA that's currently being managed by the same financial advisor as my dad. I plan on keeping the vast majority of the money invested because I want to leave money for my kids when I croak. I'm grateful I found this forum because I have no idea if I'm overpaying for something I can do myself. I've read about the "three-fund portfolio", amongst other topics, and have a general idea of what a do-it-yourself Target Retirement Portfolio might look like.

From what I can tell the IRA consists of five portfolios, which each consists of various mutual funds, fund of funds, or EFTs. Each of the funds has its own expense ratios (Yes, I know how you all feel about expense ratios and advisors), many of which exceed 1.5%. For example, one portfolio is "Ocean Park Balanced" which hold SIIRX, a fund of funds with an ER of 2.22%. That's just one of dozens and that's not including the advisor's 1.2% fee.

Should I move my money? Should I wait and eat the fees until I increase my financial IQ? Do I just create one big three-fund portfolio and then go from there? I understand I'll have to pay income taxes on whatever I pull out, but I plan on reinvesting nearly all of it with Fidelity or Vanguard. Is this a straightforward process?

I imagine I'll be posting more on this forum and I appreciate everyone that's contributed thus far. It's been incredibly helpful.

Thanks!

[FiveK]

Comic630, condolences to you and your family regarding your dad, and welcome to the forum.

Because the money is in an IRA, you may sell everything there and use the proceeds to buy other funds without any tax consequences, as long as everything stays in an IRA.

If you want to do this on your own (it is very doable, although it may seem formidable at first glance), start with Getting started - Bogleheads.

If you would like some good but much less expensive hand-holding, at least to start, something like Vanguard Personal Advisor Services could be appropriate.

Talk with Fidelity or Vanguard (either would be better than what you have now), and whichever you choose have them "pull" the funds from wherever they are now. They've done this thousands of times and it works best to have your new broker "pull" things from the old.

See Asking Portfolio Questions - Bogleheads.org if you would like more specific suggestions from this group.

[David Jay]

Welcome to the forum!

Each of the funds has its own expense ratios (Yes, I know how you all feel about expense ratios and advisors), many of which exceed 1.5%. For example, one portfolio is "Ocean Park Balanced" which hold SIIRX, a fund of funds with an ER of 2.22%. That's just one of dozens and that's not including the advisor's 1.2% fee.

This is just evil, the financial advisor has been ripping your father off for years. An advisor fee of 1.0 or 1.2 should be enough and the advisor should be using low-expense funds. No excuse for this "double dipping" with high expense fees on top of the advisor fee.

I would not wait, I would move immediately as follows:

1. Select a major, low cost brokerage, often mentioned here are Fidelity, Schwab and Vanguard.
2. Work with the brokerage house receiving the account, they have the incentive for everything to go smoothly. No need to even contact this advisor.
3. When it reaches the new brokerage house, temporarily put it all in a Target Date fund with your projected retirement date in the name (i.e Target Date 2040 or whatever). This is a good holding spot while you educate yourself.
4. Figure out what you want to do with the Roth. You will be liquidating within 10 years, evaluate how to move these funds to other locations. If you are not "maxing" your work 401K, use some of the money for living expenses so you can max out your other retirement accounts.

[Big Dog]

sorry for your loss.

Yes, I'd sell everything and move it to a money market fund with current advisor. No taxes due to sell inside an IRA. (assume its a traditional IRA and not a Roth)

Contact Vanguard or Fidelity to open an account and tell them you want to transfer xx money in-kind from existing advisor. They can make the transfer electronically. From there, you can build your own 3-fund portfolio, or, if still unsure, go for a target-date fund or a Life Strategy fund (at Vanguard.)

Note, however, you will need to start taking withdrawals from the fund on a ten-year plan. (final rules are still being discussed by IRS)

[MTKRC]

Sorry for your loss -- another helpful article is about managing a Windfall, you can find it here:

https://www.bogleheads.org/wiki/Managing_a_windfall

At the bottom of that article there are links that explain Inherited IRAs and how they are currently handled. The IRS is finalizing the rules on RMDs in Inherited IRAs, you will want to follow the news so you can adjust your plans based on their rules.

You will be best served managing the funds yourself and keeping things simple. The advice to transfer your funds to a new firm are spot on.

[Jack FFR1846]

A really simple, hands off way to deal with this is to have Vanguard pull the entire account in. Then sell everything and buy a target date fund. You can leave it at that or later do your own 3 fund. Vanguard target date funds are 3 fund plus one and are fine to just leave there.

[Comic630]

Wow! You're all awesome. This forum is awesome.

I'm going to contact Fidelity or Vanguard today and have them take care of the transfer.

The financial advisor informed me of the 10-year RMD requirement and I plan on withdrawing a portion to pay off high-intertest debt and then reinvesting the rest.

Later down the road I'll post a separate topic with all of my pertinent financial info so you can help (hopefully) guide me with some upcoming financial decisions.

Thanks again!

[JDave]

I'm sorry for your loss.
My suggestion is this - fire the financial advisor immediately, and put the money (all of it except what you take now now in cash) in a balanced fund, like Vangaurd Wellington.
Then, take a year or so to study up on investing - Bogleheads forum is an excellent source, and when you're more knowledgeable, you might want to pick some different funds - or you might not.

[Doom&Gloom]

Condolences.

And to help you deal with this process internally it will almost certainly help to re-think (not edit) your title. You have inherited your dad's IRA, but you did not inherit his advisor. It's just business. Your dad chose to work with him; you are quite free to choose to work with another person and/or another company.

[RetiredAL]

If you have a Fidelity or Schwab local office near you, you can visit them and they'll get everything rolling. Vanguard does not have local offices.

Fidelity does have a good set in "index" target date funds. Note "index", as they also regular non-index target date fund at a higher ER.

[Californiastate]

Wait.
Be patient.
The last thing you should do is go on the internet and follow advice of the first person who comes along. Fortunately you've found this place and it's wealth of knowledge. I suggest reading the Wiki here and start learning. Ask as many questions as you like. The more detailed the better. You'll find an abundance of free financial advice. It's important to learn the basics to wade through the responses.

Sorry about you father

[tibbitts]

I suggest posting the current portfolio, with investment names and expense ratios and percentages in each.

I have personal experience with this situation and can tell you for a fact that Vanguard and Fidelity might not be able to assist you in any way with transferring funds out of an existing managed account. I'm sure that works for some situations, but definitely not for others.

[Goal33]

Welcome to the forum!

Each of the funds has its own expense ratios (Yes, I know how you all feel about expense ratios and advisors), many of which exceed 1.5%. For example, one portfolio is "Ocean Park Balanced" which hold SIIRX, a fund of funds with an ER of 2.22%. That's just one of dozens and that's not including the advisor's 1.2% fee.

This is just evil, the financial advisor has been ripping your father off for years. An advisor fee of 1.0 or 1.2 should be enough and the advisor should be using low-expense funds. No excuse for this "double dipping" with high expense fees on top of the advisor fee.

I would not wait, I would move immediately as follows:

1. Select a major, low cost brokerage, often mentioned here are Fidelity, Schwab and Vanguard.
2. Work with the brokerage house receiving the account, they have the incentive for everything to go smoothly. No need to even contact this advisor.
3. When it reaches the new brokerage house, temporarily put it all in a Target Date fund with your projected retirement date in the name (i.e Target Date 2040 or whatever). This is a good holding spot while you educate yourself.
4. Figure out what you want to do with the Roth. You will be liquidating within 10 years, evaluate how to move these funds to other locations. If you are not "maxing" your work 401K, use some of the money for living expenses so you can max out your other retirement accounts.

Not that what I say means anything, but I back this advice.

[Nutmeg]

Should I move my money? Should I wait and eat the fees until I increase my financial IQ? Do I just create one big three-fund portfolio and then go from there? I understand I'll have to pay income taxes on whatever I pull out, but I plan on reinvesting nearly all of it with Fidelity or Vanguard. Is this a straightforward process?

Yes, you should move your money.

No, there is no need to wait.

The three-fund portfolio is great for long-term investing, but these funds must be distributed through RMD’s within 10 years, so you should take that into account and adopt an asset allocation that has a 10-year investing horizon. The benefit of target retirement funds (which others have mentioned) is that they adopt the horizon of your choice, they do the rebalancing automatically, and you don’t have to know anything more than you already know to choose one. I would recommend a target date 2030 or 2035 retirement fund.

Yes, it is straightforward. I recently opened several accounts at Fidelity and was assigned an advisor at no cost to me, who helped with all my questions. I also recently helped a relative leave an expensive advisor, which was unpleasant. There is no need to ever talk to your father’s advisor in this process.

[Krisfilip]

I'm sorry to hear about your dad. I went through this about a year ago. Albeit, I was the primary beneficiary per bank docs and my mom was the beneficiary per the will. That created some headaches.

From the replies above the assumption is that you can roll this into an IRA for yourself. I'd recommend getting some tax advise on that. I was offered an Inheritance IRA where I had 10 years to draw the full amount down as taxable distributions. There was additional clarification from the IRS recently.

Here is a WSJ article on the rule changes and clarifications: https://www.wsj.com/articles/irs-change ... lewebshare

[Big Dog]

I'm sorry to hear about your dad. I went through this about a year ago. Albeit, I was the primary beneficiary per bank docs and my mom was the beneficiary per the will. That created some headaches.

From the replies above the assumption is that you can roll this into an IRA for yourself. I'd recommend getting some tax advise on that. I was offered an Inheritance IRA where I had 10 years to draw the full amount down as taxable distributions. There was additional clarification from the IRS recently.

Here is a WSJ article on the rule changes and clarifications: https://www.wsj.com/articles/irs-change ... lewebshare

Just to be clear, by law, dad's IRA must be retitled as an Inherited IRA. "Rolling" it (or transferring it) to Vanguard/Fido/Schwab does not change the titling, as it remains an Inherited IRA. (only surviving Spouse may retitle into spouse's own name.)

[Watty]

Later down the road I'll post a separate topic with all of my pertinent financial info so you can help (hopefully) guide me with some upcoming financial decisions.

When you are ready for that there is a suggested format for posting your information, but it is only a guideline and you do not need to follow it exactly.

viewtopic.php?t=6212

There is also a getting started wiki.

https://www.bogleheads.org/wiki/Getting_started

And the Boglehead books are very readable for someone without a background in investing.

https://www.amazon.com/s?k=Bogleheads&t ... ads.org-20

[nedsaid]

Keep in mind that you have 10 years to get all the money out of a Beneficiary IRA. It used to be that you could take the money out using the actuarial tables for your own life expectancy. Now you have a maximum of 10 years before all the money has to come out. So there is tax planning involved here as well.

[vsquid]

It sounds like you might benefit from a low cost advisory service like Vanguard’s personal advisory service. They would be able to go through your objectives and help with transitioning the account. They would setup a portfolio similar to the three fund portfolio. In addition, if you feel like you are not getting the kind of service you want, you can leave the service later and start to self manage.

[Affable at 50]

While the IRS finalizes its regulations, be aware that annual RMDs may be required throughout the ten year life of the inherited IRA,

A few important questions to ask/answer;

Based upon his age, was your Dad required to begin taking RMDs from this IRS? This factor could be very important once the IRS finalizes its regulations. The proposed regs referred to this as the required beginning date or RBD.

If he was required to take a RMD for 2022, make sure this occurs.

[aristotelian]

Sorry for your loss. First step will be to put the money in your name, which you have to do with the advisor. At that point, yes, if you are up to DIY you have higher expected return net of fees with less risk with a self managed portfolio. Go through Vanguard or your preferred custodian and they will handle the transfer for you.

[Oak&Elm]

Comic630,
Sorry for your loss, it's painful when your parents pass.
I went through a nearly identical scenario 10 years ago. In your post you mentioned

I plan on keeping the vast majority of the money invested because I want to leave money for my kids when I croak.

This lends me to assume this is a larger number. I also inherited my dads advisor from Edward Jones, nice enough guy but I couldn't see how he was adding substanial value for the money he was charging. Just saying these fees on a large portfolio could easily be in excess of $20k/year. That's a lot of money you could be saving for your family. You can do this yourself, don't get spooked and cave to your advisor.

[Dottie57]

Should I move my money? Should I wait and eat the fees until I increase my financial IQ? Do I just create one big three-fund portfolio and then go from there? I understand I'll have to pay income taxes on whatever I pull out, but I plan on reinvesting nearly all of it with Fidelity or Vanguard. Is this a straightforward process?

Yes, you should move your money.

No, there is no need to wait.

The three-fund portfolio is great for long-term investing, but these funds must be distributed through RMD’s within 10 years, so you should take that into account and adopt an asset allocation that has a 10-year investing horizon. The benefit of target retirement funds (which others have mentioned) is that they adopt the horizon of your choice, they do the rebalancing automatically, and you don’t have to know anything more than you already know to choose one. I would recommend a target date 2030 or 2035 retirement fund.

Yes, it is straightforward. I recently opened several accounts at Fidelity and was assigned an advisor at no cost to me, who helped with all my questions. I also recently helped a relative leave an expensive advisor, which was unpleasant. There is no need to ever talk to your father’s advisor in this process.

This. I had Fidelity move accounts from a Bank. The local person i talked to was very helpful. But he did try to move me into more expensive. Funds. i declined . Learn to be firm about saying no.

[Dregob]

Hello Bogleheads,

This is my first post on the forum and I know VERY LITTLE about investing, so please take it easy on me.

My father passed away a few weeks ago and I inherited his IRA. He had an trust, I signed papers, and now I have a beneficiary IRA that's currently being managed by the same financial advisor as my dad. I plan on keeping the vast majority of the money invested because I want to leave money for my kids when I croak. I'm grateful I found this forum because I have no idea if I'm overpaying for something I can do myself. I've read about the "three-fund portfolio", amongst other topics, and have a general idea of what a do-it-yourself Target Retirement Portfolio might look like.

From what I can tell the IRA consists of five portfolios, which each consists of various mutual funds, fund of funds, or EFTs. Each of the funds has its own expense ratios (Yes, I know how you all feel about expense ratios and advisors), many of which exceed 1.5%. For example, one portfolio is "Ocean Park Balanced" which hold SIIRX, a fund of funds with an ER of 2.22%. That's just one of dozens and that's not including the advisor's 1.2% fee.

Should I move my money? Should I wait and eat the fees until I increase my financial IQ? Do I just create one big three-fund portfolio and then go from there? I understand I'll have to pay income taxes on whatever I pull out, but I plan on reinvesting nearly all of it with Fidelity or Vanguard. Is this a straightforward process?

I imagine I'll be posting more on this forum and I appreciate everyone that's contributed thus far. It's been incredibly helpful.

Thanks!

I'd dump the advisor and set up an inherited IRA at Vanguard (for example).
They'll let you know about RMDs and you will probably need to empty the account within 10 years. You can't just leave it and pass it on your kids.

[Jazztonight]

A really simple, hands off way to deal with this is to have Vanguard pull the entire account in...

Regardless of where you decide to put the funds, I second this recommendation to have Vanguard (or Fidelity, whatever) deal with the transfer of funds.

If you don't want to feel bad about it, send the "advisor" a nice thank you note saying you've "talked to your own advisor and decided to do this. Goodbye and thanks for taking care of my Dad." Ciao, baby.

You'll get good advice and opinions here.

At one point I was dealing with an employer whom I did not want to confront, and I had the guy at Vanguard call the finance guy at my company while I was on the line and transfer my account/funds. The company guy didn't say "Boo." I had been nervous but it went smoothly. Like others have said, Vanguard does this kind of stuff all the time. In a month or two it will all be over and on your way. Sorry about your loss.

[beernutz]

My condolences.

Was your dad already taking RMDs on his IRA?

Hello Bogleheads,

This is my first post on the forum and I know VERY LITTLE about investing, so please take it easy on me.

My father passed away a few weeks ago and I inherited his IRA. He had an trust, I signed papers, and now I have a beneficiary IRA that's currently being managed by the same financial advisor as my dad. I plan on keeping the vast majority of the money invested because I want to leave money for my kids when I croak. I'm grateful I found this forum because I have no idea if I'm overpaying for something I can do myself. I've read about the "three-fund portfolio", amongst other topics, and have a general idea of what a do-it-yourself Target Retirement Portfolio might look like.

From what I can tell the IRA consists of five portfolios, which each consists of various mutual funds, fund of funds, or EFTs. Each of the funds has its own expense ratios (Yes, I know how you all feel about expense ratios and advisors), many of which exceed 1.5%. For example, one portfolio is "Ocean Park Balanced" which hold SIIRX, a fund of funds with an ER of 2.22%. That's just one of dozens and that's not including the advisor's 1.2% fee.

Should I move my money? Should I wait and eat the fees until I increase my financial IQ? Do I just create one big three-fund portfolio and then go from there? I understand I'll have to pay income taxes on whatever I pull out, but I plan on reinvesting nearly all of it with Fidelity or Vanguard. Is this a straightforward process?

I imagine I'll be posting more on this forum and I appreciate everyone that's contributed thus far. It's been incredibly helpful.

Thanks!

[arcticpineapplecorp.]

I'm sorry to hear about your dad. I went through this about a year ago. Albeit, I was the primary beneficiary per bank docs and my mom was the beneficiary per the will. That created some headaches.

From the replies above the assumption is that you can roll this into an IRA for yourself. I'd recommend getting some tax advise on that. I was offered an Inheritance IRA where I had 10 years to draw the full amount down as taxable distributions. There was additional clarification from the IRS recently.

Here is a WSJ article on the rule changes and clarifications: https://www.wsj.com/articles/irs-change ... lewebshare

Just to be clear, by law, dad's IRA must be retitled as an Inherited IRA. "Rolling" it (or transferring it) to Vanguard/Fido/Schwab does not change the titling, as it remains an Inherited IRA. (only surviving Spouse may retitle into spouse's own name.)

yes and the titling is important according to Ed Slott:

The titling of an inherited IRA can vary from one IRA custodian to another. The deceased IRA owner’s name must remain on the inherited IRA account title and the account title must indicate that it is an inherited IRA by using the word “beneficiary” or “beneficiary IRA” or “inherited IRA.”

There is no set format as long as the deceased IRA owner’s name remains on the account and it is clear that this is an inherited IRA. Some examples of properly titled inherited IRAs are “John Smith IRA (deceased 11/27/09) F/B/O John Smith, Jr., Beneficiary” or “Brian Willow as beneficiary of Joan Maple.”

source: https://www.irahelp.com/slottreport/how ... erited-ira

[BBurki]

The financial advisor informed me of the 10-year RMD requirement and I plan on withdrawing a portion to pay off high-intertest debt and then reinvesting the rest.

Use caution when taking distributions because it will be taxed as regular income. For instance, if your employment income + the IRA distributions equal more than $170,051 single $340,101 married filing jointly then you'll be in the 32% tax bracket for 2022.

I'm in a similar situation and Fidelity sends me a distribution every month that's calculated to be just enough to empty out the inherited IRA in 10 years (or close to it). And then I max out my tax deferred 401k, and HSA contributions. That way I'm basically redirecting the inherited IRA funds back into other tax deferred accounts.

[Alan S.]

If Dad passed after his RMDs had begun, the IRS has proposed that the 10 year rule must be accompanied by annual life expectancy RMDs in years 1-9. This proposal is not yet final, and has been protested by many.

But this is a moot point if the inherited IRA is going to be drained somewhat ratably in each year (eg. 1/10, 1/9, 1/8 etc) because somewhat equal annual distributions will more than satisfy the annual RMDs, if the final Regs so require.

Finally, if Dad did not complete this year's RMD, you are responsible for completing it this year.

[niagara_guy]

Your 'advisor' is probably charging you high fees, like 1% AUM (assets under management) per year plus high fund fees, maybe another 1% per year. Of course your 'advisor' will tell you he beats the market, get that in writing as part of your contract (yeah, good luck with that). So, on a million dollar portfolio you are giving your 'advisor' 20,000 per year, in 10 years that's 200k.

I use Fidelity, Schwab and Vanguard, all are good and all have low fees (use the low fee index funds). I basically use the 3 fund portfolio suggested here and have done very well (of course a rising market over the last 30 years and some luck helped).

[pkcrafter]

Hello Bogleheads,

From what I can tell the IRA consists of five portfolios, which each consists of various mutual funds, fund of funds, or EFTs. Each of the funds has its own expense ratios (Yes, I know how you all feel about expense ratios and advisors), many of which exceed 1.5%. For example, one portfolio is "Ocean Park Balanced" which hold SIIRX, a fund of funds with an ER of 2.22%. That's just one of dozens and that's not including the advisor's 1.2% fee.

You might consider posting all the funds you hold, along with ticker symbols and expense ratios. I could not find a fund with ticker SIIRX.

Should I move my money? Should I wait and eat the fees until I increase my financial IQ? Do I just create one big three-fund portfolio and then go from there? I understand I'll have to pay income taxes on whatever I pull out, but I plan on reinvesting nearly all of it with Fidelity or Vanguard. Is this a straightforward process?

Yes, it's a straight forward process as long as the receiving company carries all the funds you want to transfer. Transfers are always initiated by the receiving company. Fidelity would be a good choice, or maybe Schwab.

I imagine I'll be posting more on this forum and I appreciate everyone that's contributed thus far. It's been incredibly helpful.

Yes, continue to post and learn. Your first order of business is to stop AUM (assets under management), then sell the funds, or try to move them all to the new custodian after confirming the new custodian carries them.


Paul

[RCL]

Would it make sense for the OP the change everything in the IRA to a Money Market type of fund in order to simplify a transfer?
Especially if there are assets that can't be transferred in-like?

[retiredjg]

Getting away from the advisor does not necessarily mean you have to move the money.

For example, if the funds are currently housed at Schwab, you can leave the money there...but without the advisor.

[Kinkajou82]

The three-fund portfolio is great for long-term investing, but these funds must be distributed through RMD’s within 10 years, so you should take that into account and adopt an asset allocation that has a 10-year investing horizon. The benefit of target retirement funds (which others have mentioned) is that they adopt the horizon of your choice, they do the rebalancing automatically, and you don’t have to know anything more than you already know to choose one. I would recommend a target date 2030 or 2035 retirement fund.

Just came to this thread to lurk and learn and I'm happy I did. I didn't think about how the required distributions from an inherited IRA affects investment strategy. Three fund definitely sounds mismatched for this, and now I can see why there's a lot of recommendations for simple target dates funds.

This means that if one wants to take this IRA and use it to help leave an inheritance behind for one's heirs, unless you die within ten years then the plan of action might be to invest lots of one's OWN money/income, more than you typically would, because you'd be forced to drain this inherited IRA up over 10 years so why not earmark those forced withdrawals to cover the difference/living expenses caused by your mega saving?

[ernest3]

It may be worth it to speak to a fee only advisor here (like Rick Ferri or Jon Luskin).

Depending on your other accounts and tax bracket, it may make sense to control how much this account grows by only holding bonds in it since it will all need to be withdrawn (and taxed) within 10 years.

[tibbitts]

The three-fund portfolio is great for long-term investing, but these funds must be distributed through RMD’s within 10 years, so you should take that into account and adopt an asset allocation that has a 10-year investing horizon. The benefit of target retirement funds (which others have mentioned) is that they adopt the horizon of your choice, they do the rebalancing automatically, and you don’t have to know anything more than you already know to choose one. I would recommend a target date 2030 or 2035 retirement fund.

Just came to this thread to lurk and learn and I'm happy I did. I didn't think about how the required distributions from an inherited IRA affects investment strategy. Three fund definitely sounds mismatched for this, and now I can see why there's a lot of recommendations for simple target dates funds.

This means that if one wants to take this IRA and use it to help leave an inheritance behind for one's heirs, unless you die within ten years then the plan of action might be to invest lots of one's OWN money/income, more than you typically would, because you'd be forced to drain this inherited IRA up over 10 years so why not earmark those forced withdrawals to cover the difference/living expenses caused by your mega saving?

Are you saying this "mega saving" will be entirely in your deferred accounts, with money that you're not contributing to them now? Otherwise I'm not seeing the point.

[retire2022]

Just to be clear, by law, dad's IRA must be retitled as an Inherited IRA. "Rolling" it (or transferring it) to Vanguard/Fido/Schwab does not change the titling, as it remains an Inherited IRA. (only surviving Spouse may retitle into spouse's own name.)

+1 OP, read this thread on titling, for futher clarification inherited IRAs: viewtopic.php?t=382968

[bertilak]

1. As mentioned above, sell everything, keeping the proceeds in the IRA.
2. Transfer that IRA to your preferred broker. Do this from the receiving end. THIS IS IMPRTANT! They will be happy to work for your business. The original broker will be dealing with the new broker and will not have an opportunity to try to talk you out of it. This may involve a three-way phone call, but the original broker won't try any shenanigans with your new broker on the line.

You can do the above in either order.

[celia]

Wait.
Be patient.
The last thing you should do is go on the internet and follow advice of the first person who comes along. Fortunately you've found this place and it's wealth of knowledge. I suggest reading the Wiki here and start learning. Ask as many questions as you like. The more detailed the better. You'll find an abundance of free financial advice. It's important to learn the basics to wade through the responses.

Sorry about you father

+100

Don't do anything other than take ownership of the Inherited IRA(s). Even that can be problematic if there were certain bonds in it that were split, leaving you with a partial bond (if there were other beneficiaries) that none of you can sell.

Since you mentioned a trust (that I assume you are a beneficiary of), you should first contact the trustee to request a copy of the trust and list of the deceased's assets. Until you know what the entire portfolio is that you will be inheriting, I don't see how you can invest part of the portfolio without knowing what else it contains. In fact, you also should look at your assets/debts too and look at your future wealth as a whole. If some assets will not be distributed for a while, you need to understand that.

If there is real estate that will need to be cleared out and sold, the whole process could take a year or more.

And don't sign anything you don't understand.

[dogagility]

I'm going to contact Fidelity or Vanguard today and have them take care of the transfer.

I'd use Vanguard instead of Fidelity. Fidelity may charge your more than Vanguard should you want investing advice.

However, Fidelity is a fine company to use if you can DIY investing into their low-cost index funds. If you want to pay for investing help, then Vanguard is the better brokerage (lower fee).

[Kinkajou82]

The three-fund portfolio is great for long-term investing, but these funds must be distributed through RMD’s within 10 years, so you should take that into account and adopt an asset allocation that has a 10-year investing horizon. The benefit of target retirement funds (which others have mentioned) is that they adopt the horizon of your choice, they do the rebalancing automatically, and you don’t have to know anything more than you already know to choose one. I would recommend a target date 2030 or 2035 retirement fund.

Just came to this thread to lurk and learn and I'm happy I did. I didn't think about how the required distributions from an inherited IRA affects investment strategy. Three fund definitely sounds mismatched for this, and now I can see why there's a lot of recommendations for simple target dates funds.

This means that if one wants to take this IRA and use it to help leave an inheritance behind for one's heirs, unless you die within ten years then the plan of action might be to invest lots of one's OWN money/income, more than you typically would, because you'd be forced to drain this inherited IRA up over 10 years so why not earmark those forced withdrawals to cover the difference/living expenses caused by your mega saving?

Are you saying this "mega saving" will be entirely in your deferred accounts, with money that you're not contributing to them now? Otherwise I'm not seeing the point.

Yes, that was the assumption I was making. Sorry that I wasn't clear.

[tibbitts]

The three-fund portfolio is great for long-term investing, but these funds must be distributed through RMD’s within 10 years, so you should take that into account and adopt an asset allocation that has a 10-year investing horizon. The benefit of target retirement funds (which others have mentioned) is that they adopt the horizon of your choice, they do the rebalancing automatically, and you don’t have to know anything more than you already know to choose one. I would recommend a target date 2030 or 2035 retirement fund.

Just came to this thread to lurk and learn and I'm happy I did. I didn't think about how the required distributions from an inherited IRA affects investment strategy. Three fund definitely sounds mismatched for this, and now I can see why there's a lot of recommendations for simple target dates funds.

This means that if one wants to take this IRA and use it to help leave an inheritance behind for one's heirs, unless you die within ten years then the plan of action might be to invest lots of one's OWN money/income, more than you typically would, because you'd be forced to drain this inherited IRA up over 10 years so why not earmark those forced withdrawals to cover the difference/living expenses caused by your mega saving?

Are you saying this "mega saving" will be entirely in your deferred accounts, with money that you're not contributing to them now? Otherwise I'm not seeing the point.

Yes, that was the assumption I was making. Sorry that I wasn't clear.

Okay that makes sense; it basically retains the deferred status of the IRA funds, as long as you have sufficient deferred space for new contributions.

[Nutmeg]

Wait.
Be patient.
The last thing you should do is go on the internet and follow advice of the first person who comes along. Fortunately you've found this place and it's wealth of knowledge. I suggest reading the Wiki here and start learning. Ask as many questions as you like. The more detailed the better. You'll find an abundance of free financial advice. It's important to learn the basics to wade through the responses.

Sorry about you father

+100

Don't do anything other than take ownership of the Inherited IRA(s). Even that can be problematic if there were certain bonds in it that were split, leaving you with a partial bond (if there were other beneficiaries) that none of you can sell.

Since you mentioned a trust (that I assume you are a beneficiary of), you should first contact the trustee to request a copy of the trust and list of the deceased's assets. Until you know what the entire portfolio is that you will be inheriting, I don't see how you can invest part of the portfolio without knowing what else it contains. In fact, you also should look at your assets/debts too and look at your future wealth as a whole. If some assets will not be distributed for a while, you need to understand that.

If there is real estate that will need to be cleared out and sold, the whole process could take a year or more.

And don't sign anything you don't understand.

I heartily support celia’s suggestions of steps to take before deciding whether to invest in a three-fund portfolio or a retirement date portfolio or something else. When the time comes, however, I am confident that you can do better than investing in five portfolios holding some funds with greater than 1.5 percent expense ratios and an AUM fee of 1.2 percent, which is why you should choose a brokerage such as Vanguard or Fidelity for transferring and titling the IRA.

[motiv8ed]

Comic630,

My condolences on your loss.

I'm working through a substantially similar situation right now, both with an IRA and an AUM advisor. The deceased's assets are in TD Ameritrade, and we're transferring them to Fidelity. My Fidelity PCG advisor gave me a recommendation I'd not seen mentioned anywhere online, including Bogleheads. His advice was to create the Inherited IRA at TDA first, and only once that's done can/should we transfer it to Fidelity. While in theory it's possible to go straight from the deceased's IRA to the new institution, if only the slightest thing is off in the paperwork or transfer, it confuses the hell out of both of companies and, worst case, you the beneficiary end up having to fix it with the IRS. (No thanks!) So, he said, with inheritances, only ever transfer like-to-like accounts between firms.

1. As mentioned above, sell everything, keeping the proceeds in the IRA.

Actually, you as the beneficiary cannot make transactions in the deceased's IRA at all. Once notified of the account owner's death, the custodian (TDA, Vanguard, Fido, etc.) will immediately freeze the account. (TDA also changed the account number. I don't know if that's industry standard or not.)

[*] Transfer that IRA to your preferred broker. Do this from the receiving end. THIS IS IMPRTANT! They will be happy to work for your business. The original broker will be dealing with the new broker and will not have an opportunity to try to talk you out of it. This may involve a three-way phone call, but the original broker won't try any shenanigans with your new broker on the line.
[/list]

Yes, definitely do the transfer from the receiving end. To do this, you'll have to open an empty Inherited IRA at the receiving firm, then go through their transfer process for the like-to-like account(s).

You can do the above in either order.

Yes, but only after the original IRA was distributed to the beneficiary's Inherited IRA. Then, yes, the trades to simplify the holdings can be done either before or after the like-to-like transfer.

As far as getting rid of the advisor, that was the easy part. As soon as the original IRA in TDA was distributed to the Inherited IRA at TDA, poof, no more advisor! I think TDA stopped allowing him to charge the IRA as soon as it was frozen, but I don't have the statements in front of me to check.


motiv8ed

[Comic630]

Wait.
Be patient.
The last thing you should do is go on the internet and follow advice of the first person who comes along. Fortunately you've found this place and it's wealth of knowledge. I suggest reading the Wiki here and start learning. Ask as many questions as you like. The more detailed the better. You'll find an abundance of free financial advice. It's important to learn the basics to wade through the responses.

Sorry about you father

+100

Don't do anything other than take ownership of the Inherited IRA(s). Even that can be problematic if there were certain bonds in it that were split, leaving you with a partial bond (if there were other beneficiaries) that none of you can sell.

Since you mentioned a trust (that I assume you are a beneficiary of), you should first contact the trustee to request a copy of the trust and list of the deceased's assets. Until you know what the entire portfolio is that you will be inheriting, I don't see how you can invest part of the portfolio without knowing what else it contains. In fact, you also should look at your assets/debts too and look at your future wealth as a whole. If some assets will not be distributed for a while, you need to understand that.

If there is real estate that will need to be cleared out and sold, the whole process could take a year or more.

And don't sign anything you don't understand.

Thank you Celia! I’ve taken ownership of the trust and everything pertaining to the trust is good to go. I was fortunate that my parents made it a fairly painless process (no probate, etc).

[Comic630]

Comic630,

My condolences on your loss.

I'm working through a substantially similar situation right now, both with an IRA and an AUM advisor. The deceased's assets are in TD Ameritrade, and we're transferring them to Fidelity. My Fidelity PCG advisor gave me a recommendation I'd not seen mentioned anywhere online, including Bogleheads. His advice was to create the Inherited IRA at TDA first, and only once that's done can/should we transfer it to Fidelity. While in theory it's possible to go straight from the deceased's IRA to the new institution, if only the slightest thing is off in the paperwork or transfer, it confuses the hell out of both of companies and, worst case, you the beneficiary end up having to fix it with the IRS. (No thanks!) So, he said, with inheritances, only ever transfer like-to-like accounts between firms.

1. As mentioned above, sell everything, keeping the proceeds in the IRA.

Actually, you as the beneficiary cannot make transactions in the deceased's IRA at all. Once notified of the account owner's death, the custodian (TDA, Vanguard, Fido, etc.) will immediately freeze the account. (TDA also changed the account number. I don't know if that's industry standard or not.)

[*] Transfer that IRA to your preferred broker. Do this from the receiving end. THIS IS IMPRTANT! They will be happy to work for your business. The original broker will be dealing with the new broker and will not have an opportunity to try to talk you out of it. This may involve a three-way phone call, but the original broker won't try any shenanigans with your new broker on the line.
[/list]

Yes, definitely do the transfer from the receiving end. To do this, you'll have to open an empty Inherited IRA at the receiving firm, then go through their transfer process for the like-to-like account(s).

You can do the above in either order.

Yes, but only after the original IRA was distributed to the beneficiary's Inherited IRA. Then, yes, the trades to simplify the holdings can be done either before or after the like-to-like transfer.

As far as getting rid of the advisor, that was the easy part. As soon as the original IRA in TDA was distributed to the Inherited IRA at TDA, poof, no more advisor! I think TDA stopped allowing him to charge the IRA as soon as it was frozen, but I don't have the statements in front of me to check.


motiv8ed

Thank you. My dad’s IRA was changed to an inherited IRA at TD before I did anything. The advisor said something similar. I wanted everything taken care of before I started “wheeling & dealing”.

[Target2019]

Thank you. My dad’s IRA was changed to an inherited IRA at TD before I did anything. The advisor said something similar. I wanted everything taken care of before I started “wheeling & dealing”.

TDAmeritrade and Schwab are one company now. If you take a month or so to explore all of your options it won't affect the final outcome very much.

What I recommend is to call or visit Fidelity, Schwab and Vanguard. Many who are advising you (like myself) are do-it-yourself. You'd want to understand what that means as contrasted with the very high fees and expenses of the present situation.

A particular company may want your business more than another, and offer you additional incentive to move your money.

Whatever you hear or find, it makes a lot of sense to post a summary here for further advice.

I use Schwab and Vanguard. I prefer the convenience of the local Schwab office, emails to a specific VP at the branch, and the online real-time messaging. Others have different preferences, and of course, YMMV.

[celia]

Actually, you as the beneficiary cannot make transactions in the deceased's IRA at all. Once notified of the account owner's death, the custodian (TDA, Vanguard, Fido, etc.) will immediately freeze the account. (TDA also changed the account number. I don't know if that's industry standard or not.)

I have seen it done both ways. But when all is said and done, you will find it better if new accounts were created for the beneficiary/ies because that maintains the history of which transactions were done under each SSN/ EIN/ TIN. Come tax time, it will be easier to prepare tax returns for the deceased, the OP, and possibly the trust, if the tax forms arrive next January under the correct number. If you overwrite the account title and SSN field, no-one will be able to find the original account in the future. (Ask me how I know.)

OP, if the Taxable assets didn’t get a step-up of cost basis as of date of death, you should request that asap. (This only applies to Taxable accounts.)

[island]

Actually, you as the beneficiary cannot make transactions in the deceased's IRA at all. Once notified of the account owner's death, the custodian (TDA, Vanguard, Fido, etc.) will immediately freeze the account. (TDA also changed the account number. I don't know if that's industry standard or not.)

I have seen it done both ways. But when all is said and done, you will find it better if new accounts were created for the beneficiary/ies because that maintains the history of which transactions were done under each SSN/ EIN/ TIN. Come tax time, it will be easier to prepare tax returns for the deceased, the OP, and possibly the trust, if the tax forms arrive next January under the correct number. If you overwrite the account title and SSN field, no-one will be able to find the original account in the future. (Ask me how I know.)

OP, if the Taxable assets didn’t get a step-up of cost basis as of date of death, you should request that asap. (This only applies to Taxable accounts.)

Celia, how does one insure taxable assets in taxable account got a step-up cost basis at DOD? Who does the beneficiary request that from? What documents are needed to prove it? Thank you.

[bsteiner]

Actually, you as the beneficiary cannot make transactions in the deceased's IRA at all. Once notified of the account owner's death, the custodian (TDA, Vanguard, Fido, etc.) will immediately freeze the account. (TDA also changed the account number. I don't know if that's industry standard or not.)

I have seen it done both ways. But when all is said and done, you will find it better if new accounts were created for the beneficiary/ies because that maintains the history of which transactions were done under each SSN/ EIN/ TIN. Come tax time, it will be easier to prepare tax returns for the deceased, the OP, and possibly the trust, if the tax forms arrive next January under the correct number. If you overwrite the account title and SSN field, no-one will be able to find the original account in the future. (Ask me how I know.)

OP, if the Taxable assets didn’t get a step-up of cost basis as of date of death, you should request that asap. (This only applies to Taxable accounts.)

Celia, how does one insure taxable assets in taxable account got a step-up cost basis at DOD? Who does the beneficiary request that from? What documents are needed to prove it? Thank you.

With a few exceptions such as IRAs, assets included in a decedent's estate for Federal estate tax purposes (even if the estate is too small to file a Federal estate tax return) get a new basis equal to the estate tax value (generally the date of death value) by reason of Internal Revenue Code 1014. You don't have to request it from anyone. You get it whether you know about it or not, and whether you want it or not.

However, to facilitate the reporting on your tax returns, executors and beneficiaries should let the financial institutions know that the decedent died, and the date of death. You may also want to give them the information as to the new basis, since they don't know whether the estate elected alternate valuation, and in the case of trusts, they don't know whether a trust was included in the decedent's estate for estate tax purposes (for example, a marital (QTIP) trust). In the case of individual securities, some financial institutions know to use the average of the high and the low prices rather than the closing prices but some don't. Some have access to the same software that law firms have, but others don't and thus depend on the executor or beneficiary to give them the information.