I inherited the money I used to open this IRA from my father’s IRA, does this count as inherited IRA even though his name is not on the account?

Forum|Forum|1 year ago
October 3, 2024
3 replies
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My dad’s IRA sent me a check that I took directly to Edward Jones and opened a new IRA with it.

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Best answer by dmertz

You used cash from the (generally taxable) distribution from the inherited IRA to make a regular contribution to your own IRA, subject to annual contribution limits.

The only way that this could have been an inherited IRA is if the money was moved by non-reportable trustee-to-trustee transfer, meaning that the check would have had to have been made out to a receiving inherited IRA for your benefit, not to you personally. The titling of an inherited IRA for your benefit would have had both your name as the one for whom the account is maintained and your father's name as the original participant.

Anonymous_

Employee

No text available

fanfare

Employee

Once you cash the check for other purposes, the inherited IRA with decedent as owner is dissolved.

@lauramcmaster

dmertzAnswer

Employee

You used cash from the (generally taxable) distribution from the inherited IRA to make a regular contribution to your own IRA, subject to annual contribution limits.

Opus 17

Employee

How much money? If more than $7000 (or more than $8000 if you are over age 50) that will affect the answer.

We need to know if your father's IRA was cashed out, or if this was a rollover of some kind (which might have been improper). And if it was cashed out, who will pay the tax, you or the estate?

If it was some kind of rollover, it may have been done improperly, or I might be misunderstanding what happened.

lauramcmasterAuthor

Dad’s IRA was cashed out to me and my brother, each got half. I took the check they sent to me and opened the IRA in my name, it was about $30,000, and taxes were taken out before I got the check.

dmertz

Employee

This definitely constitutes a regular contribution to your own IRA and if you put all $30,000 into an IRA, you certainly have made an excess IRA contribution subject to excess-contribution penalties unless corrected. The distribution made to you and your brother was not eligible for rollover to an inherited IRA even if it had been deposited into an inherited IRA titled as being for you as beneficiary and your father as the original participant and still would have resulted in an excess contribution.

If you made this deposit in 2023 (or in 2024 as a 2023 contribution, which seems unlikely under the circumstances), you have only until October 15, 2024 to obtain a return of the excess contribution (assuming that by April 15, 2024 you either filed your 2023 tax return or requested a filing extension).