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Who’s our tax/IRA/beneficiary person here?
Posted on 1/5/23 at 6:26 pm
Posted on 1/5/23 at 6:26 pm
Longer post so sorry….
Question that I can’t get a clear answer from anybody on (her cpa and FA have given me two differing opinions):
- dad had IRA with chase. Assuming it’s a Roth type as it was deposited pretax through his employers payroll deduction
- dad passed away in 2021
- mom was beneficiary on the IRA
- finally after over 12 months, mom finally gets chase to issue check to close said IRA
- no taxes etc were held back by chase
- check was made out to her personally.
Question:
- can she take this check made payable to her and put it into an IRA as a rollover IRA (to save from taxes). I’m reading some places that if this is the case the check should have been made out to ie Charles Schwab FBO personal name.
- she only gets his pension and ss for income so she can’t go open up a regular IRA as she doesn’t have employment income (correct)?
- it would have to be a rollover/beneficiary type IRA she puts it in within 60 days of chase issuing that check to her correct?
OR
Did all this rollover madness go away when the check was issued to her personally? Will a brokerage not open up a beneficiary IRA if the check isn’t made out FBO?
Trying to determine if she’s already tripped the tax on the IRA by taking a check in her personal name. If this is the case I’m just going to put it into a high interest savings or brokerage.
Question that I can’t get a clear answer from anybody on (her cpa and FA have given me two differing opinions):
- dad had IRA with chase. Assuming it’s a Roth type as it was deposited pretax through his employers payroll deduction
- dad passed away in 2021
- mom was beneficiary on the IRA
- finally after over 12 months, mom finally gets chase to issue check to close said IRA
- no taxes etc were held back by chase
- check was made out to her personally.
Question:
- can she take this check made payable to her and put it into an IRA as a rollover IRA (to save from taxes). I’m reading some places that if this is the case the check should have been made out to ie Charles Schwab FBO personal name.
- she only gets his pension and ss for income so she can’t go open up a regular IRA as she doesn’t have employment income (correct)?
- it would have to be a rollover/beneficiary type IRA she puts it in within 60 days of chase issuing that check to her correct?
OR
Did all this rollover madness go away when the check was issued to her personally? Will a brokerage not open up a beneficiary IRA if the check isn’t made out FBO?
Trying to determine if she’s already tripped the tax on the IRA by taking a check in her personal name. If this is the case I’m just going to put it into a high interest savings or brokerage.
4
Posted on 1/5/23 at 7:07 pm to Im4datigers
quote:
The third option, and one that’s unique for surviving spouses, is the spousal rollover, or fresh start, IRA. The surviving spouse can use this option for his or her share of an IRA even when there are other primary beneficiaries. Under this option, the surviving spouse rolls over the assets to his or her own IRA. The rollover can be done by the IRA custodians, or the surviving spouse can take a distribution and deposit that amount into his or her own IRA within 60 days. The spousal IRA can be a new IRA set up for this purpose or an existing IRA. The assets also can be moved tax-free to any other qualified retirement plan account of the surviving spouse, such as a 401(k) account.
LINK
Posted on 1/5/23 at 7:11 pm to Im4datigers
If it was pre-tax (i.e. tax deferred), it’s not a Roth. I’m not familiar with individual IRAs that are funded through employer payroll deductions.
To your question, the beneficiary can accept the funds either as a rollover (not taxed and usually a transfer) or get a check and deposit it in a regular account (taxed). There should have been a form that your mother filled out instructing Chase what option she wanted.
I would check how Chase was instructed to send the funds. If she didn’t instruct them to do it as a rollover she might be out of luck. You can always call Chase and see if anything can be done but good luck with that.
It’s also important how they coded the transfer (if a rollover or not). I had a lot of problems when it was coded wrongly but transferred correctly.
ETA. what Ocean said is more helpful. My experience was not a spousal transfer.
To your question, the beneficiary can accept the funds either as a rollover (not taxed and usually a transfer) or get a check and deposit it in a regular account (taxed). There should have been a form that your mother filled out instructing Chase what option she wanted.
I would check how Chase was instructed to send the funds. If she didn’t instruct them to do it as a rollover she might be out of luck. You can always call Chase and see if anything can be done but good luck with that.
It’s also important how they coded the transfer (if a rollover or not). I had a lot of problems when it was coded wrongly but transferred correctly.
ETA. what Ocean said is more helpful. My experience was not a spousal transfer.
This post was edited on 1/5/23 at 7:15 pm
Posted on 1/5/23 at 9:54 pm to TheOcean
You would open up a traditional IRA for your mom, then have the same amount deposited into it as she received. Makes sure to let the new custodian know it’s a 60-day rollover so they can code it appropriately. The only amount that is not eligible for the 60-day rollover is any required minimum distribution your father would have been required to take.
ETA - I believe the account would need to be an Ira for your mom in her name only, not an inherited IRA for your mom, as I don’t think you can do 60-day rollovers into inherited accounts, but I could be wrong.
ETA - I believe the account would need to be an Ira for your mom in her name only, not an inherited IRA for your mom, as I don’t think you can do 60-day rollovers into inherited accounts, but I could be wrong.
This post was edited on 1/5/23 at 9:58 pm
Posted on 1/5/23 at 10:48 pm to Im4datigers
I thought rule was you couldn't commingle
Aka once that check goes in non-tax deferred account it's no longer tax deferred
If you put in ira might be okay
I don't know thougb
Aka once that check goes in non-tax deferred account it's no longer tax deferred
If you put in ira might be okay
I don't know thougb
Posted on 1/6/23 at 8:07 am to slackster
quote:
ETA - I believe the account would need to be an Ira for your mom in her name only, not an inherited IRA for your mom, as I don’t think you can do 60-day rollovers into inherited accounts, but I could be wrong.
Yup. You can't do a 60 day rollover for inherited IRAs... unless it's a spousal transfer. So it would have to be in her name.
Also, to the OP...
If she doeesn't have any earned income, she can't make her own IRA contribution... but that does not preclude a rollover or spousal transfer.
But that 60 day rule is no joke. It's not something the IRS will easily allow an exception for. It's got to be in the new account within 60 days.
Posted on 1/6/23 at 12:12 pm to Im4datigers
You might want to check out the sections on inherited IRA and spousal inheritance in The Retirement Savings Tax Bomb AMAZON.com
I read it recently and the author points out common missteps that can trigger unnecessary taxes.
I read it recently and the author points out common missteps that can trigger unnecessary taxes.
This post was edited on 1/6/23 at 12:13 pm
Posted on 1/6/23 at 1:57 pm to TorchtheFlyingTiger
Thanks everyone. Clear as mud right!!!
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