Inherited IRA
I have a client whose mother recntly passed away and she and her brother are designated beneficiaries. In the non spouse checklist – it says to change the SSN on the account – whose SSN dod they change it to? – They are planning on spliting the IRA so each can use thier own life expectancy in the stretch period. One custodian is telling them that the RMD for this year (year of death) will be made to the estate – I thought it should have been distributed to my client and her brother. Is this correct?
Also she is inheriting 2 differnet IRAs from her mother – can she conbine them into one inherited (properly titled) IRA for her?
Permalink Submitted by Alan Spross on Thu, 2007-09-06 03:53
You are correct. Any distributions go to the designated beneficiaries, not to the estate. As such they are reported under the SSN of the recipient. The easiest way is to split the RMD equally, but that is not an IRS requirement as long as the RMD is distributed for the correct total year of death obligation.
A separate account can then be established for one of the beneficiaries and the SSN on the original account changed to that of the other. Some custodians may require a new account to be set up for each, but that is a custodial administrative issue. Each should name their own successor beneficiary ASAP.
A beneficiary can combine two inherited IRA accounts from the same decedent, but this should only be done if the RMD factor is the same for each inherited account. There are a few situations where they are NOT the same.
Finally, the beneficiaries should determine if there is any inherited basis in the event mother made any non deductible contributions.