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This particular account is a rollover IRA which originally came from a company plan years ago. It truly is a TOD account, Transfer on Death,

Here's the problem with that. (I still can't imagine how it managed to get titled that way.)

IRAs are customarily titled

ABC Brokerage, Custodian
IRA FBO (for benefit of) John Doe

John is commonly called the owner. The owner can (and should) name IRA benficiaries. Upon the owner's death, the beneficiaries have options as inicated in Pub 590. There are two types of beneficiaries: spouse and non-spouse. Only a spouse beneficiary can elect to treat the IRA as his/her own. This is a tax-law restriction.

As you know, TOD accounts involve a simple change of the name of the owner after death. If that same process was used with respect to a non-spouse beneficiary of an IRA it would be illegal. Inherited IRAs are titled so to indicate that they're inherited, who the decedent was, and who the benficiary is. I have no idea what would happen upon the death of this IRA owner with the "TOD" designation on the account, but it would likely be a mess and could wind up with the beneficiary being required to withdraw the entire amount, which as noted is subject to income tax.

You really should get with the custodian and fix this. It will save a lot of grief when you, as we say in Kansas, go to your reward.

Rule Your Retirement Home Fool
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