Inherited IRA question

[bzorc]

Scenario: Son inherits IRA of father, who has passed away. Son receives a check from the original IRA custodian, and within the 60 day window, attempts to establish a decedent IRA with a mutual fund company by writing a check from his personal account. Mutual fund company rejects the application (after the 60 day window has expired) saying the transaction had to take place in a trustee-to-trustee transfer.

Is this a true statement. If it is, where is the cite in the code/regulations? Any help would be appreciated!

[Appleby]

It is a true statement- only a spouse beneficiary may roll over inherited retirement plan assets.

408 (d)(3)© denial of rollover treatment for inherited IRAs

[bzorc]

Thanks, Appleby. Let me play devil's advocate for a moment:

Assume that the son originally set up the decedent IRA in a trustee-to-trustee transfer. Does not like the new trustee, therefore, closes the account, funds are deposited into his account, and then within 60 days a new decedent IRA is established. I think this is still a no-go, based on 408(d)(3)©, because it is not a trustee-to-trustee transfer. But I want to make sure...

Thanks again.

[jevd]

Same as above. Once the account is distributed, the beneficiary is done. No Rollover, No re-establishment of inherited IRA.

[Appleby]

Right jevd- this is one of the reasons why non-spouse beneficiaries ( and of courseall retirement plan participants) must seek professional assistance before taking death distribution.

[jevd]

Appleby,

I couldn't agree with you more. More often than not, I get questions about what to do in this situation after someone has already completed a transaction that cannot be undone. If more people would seek the advice of an attorney or cpa BEFORE they

commit to a transaction they would be much better off.

I'd like to thank all of the regulars on this board for their enlightened opinions and information.

[bzorc]

Exactly what happened in this situation. Taxpayer showed us his applications approximately 10 months after he did it! And, never having someone try to write a check for an inherited IRA, I had never encountered it before. My confusion was in the definition of "rollover" and "trustee-to-trustee" transfer. I have processed many "rollovers", in the form of checks written to the new trustee as well as direct transfers from one organization to another. To me, these are "rollovers".

Now, based on this discussion, I went to Publication 590, which defines the terms "rollover" and "transfer". Based on that, it clearly shows that the taxpayer should have consulted someone first!

Thanks for all the replies, they were very helpful.