IRA distributed to incorrect bene...

[Guest TPAStacey]

I have a client whose mother died and had named her as the IRA's beneficiary. My client wanted to defer taxation and keep the IRA intact as an inherited IRA and take the RMDs based on her life expectancy. However, the attorney involved in the case had the IRA distributed to the mother's estate. Is there anyway to get the IRA distribution back into an inherited IRA with the daughter named as the bene? Is it possible if it's within 60 days due to a mistake in the original distribution?

[ERISAnut]

Sure. If she was designated as beneficiary of the IRA by her mother, and the records available at the broker shows that, then there is no other alternative than to distribute the funds to her (under whatever methods available). If such designation was clear, then the broker would have had no authority to act on the attorneys instruction. Her case is with the broker, not the estate. The broker's case is with the estate in trying to recoup the funds that were improperly distributed.

There would need to be clear documentation that your client, and not the estate, was beneficiary of the IRA.

[Guest TPAStacey]

Correction to my original post...

I just clarified my facts with the attorney (original facts were obtained second hand)...

IRA bene was the estate. Estate liquidated the IRA and placed the money in a checking account. Can the estate put the money back into the IRA within 60 days to utilize taking RMDs over the life expectancy of the deceased or is it too late?

[jevd]

Correction to my original post...

I just clarified my facts with the attorney (original facts were obtained second hand)...

IRA bene was the estate. Estate liquidated the IRA and placed the money in a checking account. Can the estate put the money back into the IRA within 60 days to utilize taking RMDs over the life expectancy of the deceased or is it too late?

Once distributed to a non-spouse beneficiary no reversal (Rollover) is allowed. If it is a genuine mistake by the broker, there may be some tax liability but it seems that the executor of the estate leaped before looking and is now stuck with the income to the estate.

Generally speaking estates need to be closed within a year unless special circumstances exist so I don't know if the estate could stretch out the payment over the life expectancy of the account owner (death after RBD) or 5 years (death before RBD). I'm not an expert in estate law but this is my general understanding.

[John G]

WARNING - Do you know who is the benefitiary on your IRA accounts?

There are lots of benefits in sensible designation of benefitiaries. These include allowing the beneficiaries to have some choices in how the funds are distributed. Another benefit is that benefitiaries can "decline" to accept the funds allowing the assetts to cascade to other primary or secondary benefitiaries - a little known "toggle" that can be built in to allow spouses partial or complete refusal of assets to move to perhaps children.

I am not suggesting that you have some say in the benefitiary designations of the IRAs of other family members. But the concepts are worth discussing.

When IRA assets are moved or transferred, one part of the process should be to insure that benefitiaries are current.