Dear Harry: My mother died about a month ago, and I inherited her IRA. My brothers and sister got other assets. I got in touch with the bank that is the IRA administrator, and I asked that they change the title to show this. The title now reads: my name, IRA. I'm concerned because you said that inherited IRAs had to be titled in a specific way to avoid disastrous consequences. Did the bank do the right thing? They obviously knew the situation.
What Harry says: In the case of husband and wife, an IRA rollover may be transferred directly to the IRA of the survivor. In all other cases, the title has to be in a specific form: Jane Doe (Deceased) IRA for Benefit of Richard Doe as Beneficiary, or equivalent words. Sometimes, the date of death is included. The present title appears as if you put the money into an IRA of your own. If that stands, you will be taxed on the whole amount as if you had withdrawn the money. In addition, you would have to remove any assets above the allowed contribution limits ($5,000 if you're under 50, $6,000 if you're at least 50). A first-class mess. Contact the bank and have them change the title. Your situation is quite clearly an administrative error and can be corrected, but don't delay. IRS does not require that you keep the money with this bank. It can be transferred directly to another custodian, but keep the title as I have suggested.