If you are the beneficiary of an IRA, be careful. The re-titling of an inherited IRA is a critical process that often is mishandled by the financial firm acting as IRA custodian.
* Knowledgeable IRA custodians use a distinct form for an inherited IRA. This form explains the beneficiary’s rights and clearly titles the account as an inherited IRA. As the beneficiary, you’ll sign such an agreement and take over the ownership of the decedent’s IRA while avoiding taxable distributions. You can extend taxable distributions over your life expectancy.
* Ignorant IRA custodians don’t act that way. Some will simply issue you a check, without advising you of your other payout options. Those options include stretching minimum required distributions over your life expectancy, extending the tax deferral.
Unless you are the decedent’s surviving spouse, you can’t roll over that distribution to your own IRA.
Instead, here’s how to title an inherited IRA: "Mary Smith, as beneficiary of John Jones,"or "John Jones, deceased, IRA, payable to Mary Smith, as beneficiary."You’ll want a format the shows this IRA was once owned by the decedent.
