Death benefit Rollover

[Guest mark824]

My father passed away in 2008 and my brother and I were both 50/50 beneficiaries. We both opted to rollover the accounts rather then take a distribution.

As it turns out my advisor (Morgan Stanley) did not roll it over to a Death Benefit IRA but into a new IRA with my name. They then rolled over an old 401k plan into that same account in 2009. Well, i know in 2009 I did not have to take a RMD but would in 2010.

They are looking into seeing if the can separate the two accounts and re-setup the original account as a Death Benefit account that is not in my name but reflects that it is a death benefit rollover. They said it was some sort of back office coding problem.

I am a bit nervous that the IRS will see this a distribution and I will not only have to pay taxes on the distribution but also pay income taxes even though I have not touched a dime.

Any help is appreciated.

Thanks,

Mark

[J Simmons]

My father passed away in 2008 and my brother and I were both 50/50 beneficiaries. We both opted to rollover the accounts rather then take a distribution.

As it turns out my advisor (Morgan Stanley) did not roll it over to a Death Benefit IRA but into a new IRA with my name. They then rolled over an old 401k plan into that same account in 2009. Well, i know in 2009 I did not have to take a RMD but would in 2010.

They are looking into seeing if the can separate the two accounts and re-setup the original account as a Death Benefit account that is not in my name but reflects that it is a death benefit rollover. They said it was some sort of back office coding problem.

I am a bit nervous that the IRS will see this a distribution and I will not only have to pay taxes on the distribution but also pay income taxes even though I have not touched a dime.

Any help is appreciated.

Thanks,

Mark

It certainly is some type of back office coding problem! (I hope they admitted that to you in writing.)

The IRS very well could see it as a distribution (income taxation) and an excess contribution (6% penalty) to a personal IRA of yours.

I think you should hire an attorney and let Morgan Stanley you will not agree to or participate in any fix that MS proposes until it signs an agreement with you to indemnify and hold you harmless against any and all adverse tax consequences from their coding error and their fix (should the IRS later challenge one or both), including the value of the loss of the continued tax deferral, and that MS waives any statute of limitations or laches defense.

[Guest Sieve]

John gives good advice in his post.