"Barry Picker" <bpickercpa[at]mindspring.com> wrote:

- quote -

It's Harrisdirect, which used to be Harris InvestorLine,
which used to be Burke, Christensen, and Lewis. Per their
forms and my phone conversations with them, the following
letter, accompanied by standard account
applications/documentation, was necessary and sufficient to
split the account:

* indicate how much cash (by percentage or dollar figure)
should go into each beneficiary account
* indicate how much of which securities should go into each
beneficiary account
* the letter should be signed by all the beneficiaries
inheriting the account (in our case, two primary
beneficiaries)

We asked to split the cash 50-50, and I took 400 shares of
one security, and my brother got the rest of the positions
in the account. The cash was split exactly evenly, as we
requested, so the FMVs of the new beneficiary accounts were
slightly different on the date of the split. Even though
the original beneficiary designation was 50-50 exactly, they
accepted the letter signed by both of us to split the
account unevenly in this way.

This split was based on our investment styles (I also plan
to reimburse my brother for the delta in commissions he'll
have to spend on selling multiple positions). In that
regard, I'm very happy with the strength of Harrisdirect's
internal processes that supports this kind of flexibility
for the average, 'little' investor -- whether they provided
this flexibility as a result of lawsuit or foresight, I'm
not sure.

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krishgoo[at]wapacut.com (Krishna Sethuraman) wrote:

- quote -

Whoa, thanks for all the help. I just didn't wait enough
time.

Krishna Sethuraman
krishgoo[at]wapacut.com

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Barry Picker wrote:

- quote -

You say not an estate asset. Okay, sure, if there are named
beneficiaries.

But, and here's a stretch, what IF both primary and
secondary beneficiary were killed in the same even (plane
crash) as the Roth holder?

Christmas Cheer$,
Harlan Lunsford, EA n LA

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- quote -

And here I thought it had to be terminated upon owner's demise.

So then, the ROTH IRA continues under the name of the owner
indefinitely while the children/grandchildren draw it out
over their expected lives? And grows tax free? My
goodness, that is really great, IF the beneficiaries aren't
greedy at the time. But think of it, grandchildren as
beneficiaries, drawing an "annuity" over the next 80 years!
Best thing since... (fill in the blank.)

Of course it IS the beneficiary's election.

Christmas Cheer$,
Harlan Lunsford, EA n LA

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- quote -

I'd say that would definitely be a problem, and I would not
recommend it. Remember, that the IRA is not a probate asset,
so it is NOT treated as part of the estate. To give someone
an estate asset (or any non-IRA asset) in order for that
person to give up part of the IRA that he is otherwise
entitled to, sounds like a taxable event to me.

Barry Picker, CPA/PFS, CFP

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"Michael T Wing CPA" <mtwingcpa[at]yahoo.com> wrote:

- quote -

I wouldn't think so. First of all, the beneficiaries become
the legal owners at the moment of death. If two
beneficiaries together own certain assets, dividing them
equally, however that is done, shouldn't result in a taxable
gain as long as there is no cash involved.

Also, since it's a capital asset and the beneficiary takes
the date of death value as the basis, the tax will
eventually be paid when the beneficiary sells. If the
estate had to treat that kind of thing as income in respect
of a decedent, I'd imagine that the beneficiary's basis
would be actual value on the date of transfer.

On the other hand, I don't do returns, so this is a guess.

Stu

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- quote -

While the Roth can be taken all in one shot tax-free,
assuming the decedent met the five year requirement, the
beauty of the Roth is the ability of the beneficiaries to
take RMDs over their life expectancies, and have the account
continue to grow on a tax free basis.

Barry Picker, CPA/PFS, CFP

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Barry Picker <bpickercpa[at]mindspring.com> wrote:

- quote -

Would there be a potential problem if values had changed
significantly since the date of death and assets from
outside the account were used to compensate?

Example: Say that the account contained 2 stocks, Company A
and Company B. Both positions were worth $50,000 on the date
of death. But, by the time of distribution, Company A had
increased to $60,000. Beneficiary 1 elects to take all of
Company A. Beneficiary 2 takes all of company B with the
understanding that he can take $10,000 of OTHER assets from
the estate to equalize the values.

Wouldn't we now have a situation where the estate might have
to recognize a gain or loss on this transaction (can't tell
which without providing more facts)? I always get nervous
when NON pro rata distributions are attempted, or other than
date of death valuations are used, because they can have
weird and unintended consequences.

MTW

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krishgoo[at]wapacut.com (Krishna Sethuraman) wrote:

- quote -

Their IRA desk reconfirmed that it's the account values on
the date of the split that determine the relative
valuations, and hence the relative amounts that must come
out of each account.

- quote -

This is still a problem for me. Brokerage X is now having
to manually go through a pile of paper to find the original
account application (and beneficiary designations). An
ounce of prevention, etc.

Krishna Sethuraman
krishgoo[at]wapacut.com

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Krishna Sethuraman wrote:

- quote -

I cringe when I hear "RMD" for a ROTH IRA. That's one of
the differences between the plans (at least while held by
the original owner).

Regardless of how you chose to actually split it, I don't
see any reason why the RMD for the INHERITED Roth IRA
wouldn't be based on the original 50% split that was willed.
I don't see why they way you split the account should be
recognized - and the cash split should probably not have
been 50-50, but as needed to equalize the two shares to the
same value.

It's too late now if this has been split into separate
accounts, but you probably should have kept it as one
account, splitting the DISTRIBUTIONS 50-50 over the life of
the younger beneficiary (or something like that, assuming
that the 5yr period didn't kick in due to a defective
designation).

- quote -

"Precedent": Talk to your tax advisor BEFORE-hand! :-)

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Krishna Sethuraman wrote:

- quote -


You said a Roth account? This is really simple, cause I
was thinking about it re my children just yesterday.

The account can be cashed in and proceeds split 50/50 with
no tax consequences. In your case I do't believe you can
direct the custodian to split the securities, sending you
half value , say 100 shares of A and 33 shares of B, with
the balance (equal value( being sent to your brother. The
account must be closed. No RMD's are required.

It's all tax free
It's the best thing since sliced bread. (or canned dog food.)

Cheer$,
Harlan Lunsford, EA n LA

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"Krishna Sethuraman" <krishgoo[at]wapacut.com> wrote:

- quote -

You are each entitled to ½ of the account, based upon the
value on the date you decide to split it. How you decide to
distribute that value is up to you.

As for a required distribution taken from the account before
the split, that should also theoretically be split 50-50.
Once the account is split, you each have to take your share
of the required distribution from your own account.

Barry Picker, CPA/PFS, CFP

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My brother and I inherited one (among many) Roth IRA from my
mother; say it's got 100sh A stock, 200sh B stock, and
$1000. We were designated as 50-50 beneficiaries, but
rather than split all the securities down the middle, we
told the brokerage (they gave us this option) to split the
cash 50-50 between us, give me 100sh of A, and give my
brother 200sh of B (to save on commissions when we sold the
shares, plus to better match our investment styles. I've
simplified this; there were about 5 different securities
that we split between us).

The value of the account on 12/31/2002 was about $14k, and
at a life expectancy of 49.4 for me (just to play it safe
this year, since I'm the older one), that's about $290 that
needs to be distributed between the two of us.

This would be *real* simple if I decided to split securities
and cash evenly down the middle, but ... here's my question.
As far as RMD's go, what is his 'interest' in the 12/31/2002
balance, and what is mine? Or, in other words, x% of the
$290 comes out of his account, and (100-x)% comes out of
mine, but what's x when the account is split based on some
property (securities, in this case) going to one beneficiary
and some property to another (and not by simple
percentages)?

I'm guessing it would be something like this:
Total = 100% = FMV(200sh B) + FMV(100sh A) + cash + cash

His interest My interest
FMV(200sh B) + cash FMV(100sh A) + cash

Is the calculation of relative 'interest' in the account
based on FMV of securities and other property on date of
death, 12/31/2002, or date of split of account? My original
thought was that it's calculated on the date of split of the
account, based on the FMV of the property (i.e, securities)
and cash that made it into each account, but then I read
somewhere that the account split was considered retroactive
to the date of death ... meaning the per-person % interest
might be based on the FMV of the securities on the date of
death?

Can someone quote an IRS publication or precedent for how to
make this determination?

Thanks,
Krishna Sethuraman
krishgoo[at]wapacut.com

P.S. Call your retirement account brokerages/custodians and
have them send you a paper copy of the beneficiaries you
have on file for your retirement accounts, then stick the
paper copy in your folder. Tell your parents to do the
same. If you receive blank forms in the mail instead,
worry.

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