retirement fund cashout

[rball73]

My elderly parents have a retirement acct with Merrill Lynch, allocated to stocks and liquid assets.  My mom tried to have a phone discussion with a M-L agent to have funds transferred to her checking acct at BOA.  She is 88, hard of hearing and does not have a great working knowledge of how to transfer funds.  Frustrated, she apparently finally told the agent to just cash out the account and put it all in the checking account. According to M-L notes he cashed out all the stocks (without a signature from either of my parents) and he supposedly told Mom to go to BOA later that week to sign to complete the transfer.  The signature never happened so now funds from sale of stocks as well as liquid assets are all still sitting in the M-L acct.  We understand taxes are due on what is withdrawn (several thousand dollars) but why can't the funds just be reinvested since they're still  in the M-L acct so taxes would only be due on occasional withdrawals instead of all at once? Thanks in advance for your help.

[macuser_22]

Your post is not clear as to what type of account the funds were in.   A "retirement account" ? was it an IRA?   If so and  she cashed it out and had the proceed put in an a regular checking account then a 1099-R should be issued and will be taxable as ordinary income.

[Opus 17]

If this was an IRA, she has 60 days to deposit the money into a new IRA at a different broker and call it a “rollover“.  She will get a 1099R to close out the first account, but she can report on her tax return that she rolled the money over to a new IRA and it will not be taxable, as long as the rollover is completed within 60 days. Any money that is not rolled over into a new account will be taxable.

[Opus 17]

Be aware that Merrill Lynch probably recorded the phone call. If they interpreted her instructions as to close the account, they could’ve put the money in a cash account waiting for deposit instructions, but it will still be out of the IRA which is the important point.

If she decides to do a rollover and keep the money in a new IRA, you may want to consider speaking with the new IRA trustee about whether there is any account arrangement that would allow you to have some control over her investments. Such as, any investment changes or withdrawals would require dual signatures or dual approval.  

To be completely frank and speaking from experience with my own elderly parents, it sounds like she was more than hard of hearing. It sounds like she got frustrated and short tempered and made a bad decision without understanding the consequences. This could be a sign that it is time for you to take a more active role in helping her manage her finances, such as by having her agree to set limits on her ability to make withdrawals and changes to the account without contacting you first.  It also sounds like it is time for your mother to sign a durable power of attorney for you, that would allow you to intervene on her behalf in certain financial matters. You probably need to have a consultation with a good elder law attorney.

[Critter-3]

If this is an IRA account then liquidating all the stocks is not  a taxable event if the proceeds are still sitting in the IRA waiting for directions.   If they moved the IRA money into a regular account  then it is a taxable event and you will get a form 1099-R next Jan  if you cannot put the money back within 60 days.