Just a question of clarity on the term FBO (For Benefit
So I have gone through my Fidelity and set up an Inherited
IRA account and contacted my brothers old company and their 401K plan administrator letting them know about doing the inherited rollover IRA.
Things go along I'm expecting a digital transfer between the holding company of the 401k (John Hancock) and Fidelity, then on day a check shows up in a UPS envelope from the company's plan administrator. It's from JH payable to "Fidelity Investments FBO: my name IRA ACCT:" & Fidelity's address, etc. for the full amount of the current value of my brother's 401K!
There may be a disconnect here that leaves me on the hook for a major tax
First my new supposed inherited IRA account is attached to my current brokerage account at Fidelity and labeled only as an "IRA".
Second, (another) tax consultant told me that the account should be identified as an IRA with my brothers name attached i.e. the TITLE of the IRA should be: "IRA FBO: My Name as beneficiary
of My Brother's Name."
So my question is that if I deposit this check as labeled into the Fidelity IRA account, will it be interpreted as a cash-out withdrawal from my brother's 401K? And then expectantly, a 1099 would show up on my doorstep for the full amount resulting in a huge tax spike.
Or does the "FBO:" minus my brother's name on the check make a that big a difference?
Considering I've jumped through the hoops to set this up as an inherited IRA account and modulate the taxes, I don't want to make a mistake here.
Should I get a separate acct at Fidelity labeled with his name referenced as shown above? Then have the check reissued with the correct TITLE?
Haven't contacted Fidelity yet, but have found that these big investment companies are like dealing with Jabba-the-hut, they don't care as long as they get paid. I can hear them now, "No, sure it will be ok, give me that check" and then when the 1099 appears, them saying, "Well you should of took care of that when you started." Arrg.