Inherited IRA

annie1956

13 years ago

I have an inherited IRA from my mother that was set up at a local bank (where she had the IRA). We are now in the process of changing banks. Can I move the IRA? If so, how & where would be the best place to put it?

thanks

A

Comments (6)

sushipup1
13 years ago
If it gets moved, it gets 'rolled over' to a new account. You can put the IRA into anything that pleases your fancy. Schwab or Vanguard, and put it into a variety of funds within each. Interest bearing accounts aren't doing a lot right now. A Vanguard (family of mutual funds) account would give you access to a number of investments within the account. Schwab, OTOH, is a full brokerage, so you can add individual stocks. Go to another bank, if you just want to invest in CDs.

The important thing is to make your choice and let the new investing agency make all the transfers for it. It will be painless. As for WHAT to invest in, that's been anything but painless recently!
jakkom
13 years ago
Be aware you will probably pay a fee for closing out the IRA and moving it. Standard stuff, just so you know. Banks tends to charge higher management fees than a good discount brokerage, and offer a generally poorer choice of funds to pick from.

If you are scared of the market and want to keep the money in CDs, check out the bank they are currently held at as to how their rates compare against the competition. The website http://cdrates.bankaholic.com/ shows you rates and can sort by term, but they do not verify the financial health of the bank. Do some homework here and pick a bank thatÂs safe even if not the highest fractional return. A lot of banks are in trouble but the FDIC doesnÂt publish that list so it can be hard to find out if a bank is real danger of being taken over.

If you don't know how to move an IRA I would certainly not classify you as someone who should be investing in individual stocks! Mutual funds (stocks aka equities) and short-term bond funds would be a better investment.

To move an account, open an account at any brokerage or financial institution Â theyÂll usually let you do it on-line Â first. See my caveats below about proper titling. THIS IS IMPORTANT! Once the account is active (entered into the system), the brokerage/FI will contact your motherÂs bank and get the funds transferred over. You do not and should not ever have to ÂtouchÂ the funds.

Schwab ranks high for customer service and widest variety of available funds. Vanguard is discount but you can only invest in Vanguard funds - they have some very good ones but also some real dogs with similar names so it can be tricky. There's an analyst who posts on-line and he specializes in Vanguard funds only, with interesting analyses of why one fund is a good investment but another similar Vanguard might not be. This is fascinating reading but more than you probably want to do.

Similar to Vanguard but with several funds ranked highly by Money magazine for overall return in their recent survey is T. Rowe Price. You might want to check the Money magazine website to read the full results of the survey article. Fidelity is the biggest pension funds broker/manager but I donÂt consider them the best from a funds standpoint.

Caveats:
The 2 critical things about Inherited IRAs are titling and distributions. You can have IRS difficulties if either of these is messed up. Wherever you move your IRA to, stay on top of these issues, because the IRS considers it your responsibility, no one else's.

Titling an Inherited IRA: NEVER combine an Inherited IRA with your personal IRA funds. The title of the account should be: "Inherited IRA deceasedname fbo yourname". So if I inherit an IRA from my mother, it is titled "Inherited IRA Susan B. Anthony fbo JKom51". FBO means 'for benefit of' and it is acceptable to use the acronym.

- Distributions must continue if your mother was taking them, but they are calculated on your life expectancy.
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?? Another CFP ?? Why would you not trust your CFP, who has a fiduciary duty to you? If that's the case, you shouldn't be using him at all, and should find someone else immediately. There are two pieces I would give you, for what they're worth. 1) If your father was taking ANY distributions from an IRA, you MUST continue these distributions. But you do not, under any circumstances, want to cash out his IRA, which is often the default choice of the Executor or Trustee handling the deceased's estate. Instead, you should order the IRA to be rolled over into an account in your name. DO NOT mix these funds with any current IRA you have. Inherited IRAs must be titled specifically to avoid issues with the IRS and should always remain a separate account(s) for recordkeeping purposes. The correct title is: Inherited IRA (deceased's full legal name) FBO (your full legal name). Do not accept any excuses from ANY financial institution that the title is too long and 'won't fit our database'. FBO means 'for benefit of' and is a legally accepted acronym. The financial institution you choose to set up the Inherited IRA will have the forms for you to fill out to open a new account. They will then contact the deceased's FinInst to arrange for the rollover and transfer of funds. This way, you don't ever handle the IRA money, and the IRS is satisfied that you did not take an early distribution which requires a 10% penalty and income tax paid. 2) You don't need to be in a hurry to decide what to do with the funds. The market is busy going up and down within a narrow range, and a few months one way or the other aren't going to make a whole lot of difference when you're talking about funds that going to be stretched out 30-45 years in the future. Feel free to park the money in short-term CDs or a money market fund (only up to the insured limit, please) until you and your advisor decide the best investment allocation for your goals and risk tolerance. If you want a truly independent CFP, you can search on the Garrett Planning website for the names of advisors in your area. Pls read the FAQs as well as the section "How To Choose An Advisor", and be sure to interview at least two, preferably three CFPs before choosing one. Best of luck to you going forward! Here is a link that might be useful: Garrett Planning Network website
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First: Why do people want to handle legal affairs without the benefit of good legal counsel? (lawyers can do a lot of the detail work for one thing.) Legal fees come out of the estate before it's distributed anyway. Second: Are you sure it's an IRREVOCABLE trust as opposed to the REVOCABLE Living Trust? Be good to find out. Third: Opening an Estate account is a must for paying bills and final expenses and pouring in any liquid assets. Is there a house involved or any real property? Are the assets - CDs, shares of stock going to be easily divisible into thirds? I'm sure you'll be juggling. Make sure you have an adequate number of death certificates - you will be needing them to deal with banks and the CDs and stocks. The executor/trix must get a taxpayer ID number for the irrevocable trust and file an annual trust income tax return. Like any tax return, this requires some work. You must keep separate records for the irrevocable trust property. My advice is to contact the lawyer who drew up the trust and will in the first place. He'll get you started on the right foot.
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terezosa / terriks
13 years ago
I have an inherited IRA, and the rules are very tricky about changing them.

I cannot stress how important this is - from jkom's post:

Caveats:
The 2 critical things about Inherited IRAs are titling and distributions. You can have IRS difficulties if either of these is messed up. Wherever you move your IRA to, stay on top of these issues, because the IRS considers it your responsibility, no one else's.

Titling an Inherited IRA: NEVER combine an Inherited IRA with your personal IRA funds. The title of the account should be: "Inherited IRA deceasedname fbo yourname". So if I inherit an IRA from my mother, it is titled "Inherited IRA Susan B. Anthony fbo JKom51". FBO means 'for benefit of' and it is acceptable to use the acronym.

When I received mine I was 47, and it was determined that my life expectancy was 94. I am required to take a distribution of 1/47 of the value of the account yearly.
annie1956
Original Author
13 years ago
Thanks for the info - I had tried finding info on moving it and did find out that it was different from regular IRA's which is why I asked. Not a regular "rollover". I knew about the "name/titling". I also read that I have to do it within the first year? Fortunately my bank right now isn't charging any fees for it - but it isn't getting any great interest at all. I have another Inherited IRA already at Vanguard (thanks to Mom) so I don't want to move it there & have two at the same place. I have my company retirement/IRA's at Fidelity. So I may look at Schwab or T Rowe Price.
And yes - I do have to take the minimum withdrawals - already checked the worksheet on the IRS website for the calculation.
Thanks a bunch. (Even thought I LOVE numbers it does get a bit confusing).
A
jakkom
13 years ago
Why would you not want to open a second Inherited IRA at Vanguard? The higher your overall account balances total, the better chance you have of hitting the higher 'breakpoints' and getting an increasing discount on fees and services. This is a good thing, not a bad thing!

Split your portfolio allocation between the two accounts and it'll be easier to figure out how to rebalance each year.
annie1956
Original Author
13 years ago
Thanks jkom - hadn't thought of it that way - just diversifying it more. Already have them discounting fees with the no paper statement route. I'll give them a call.

Inherited IRA

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