roll inherited 403B to inherited IRA; same decedent and bene
A client has an inherited IRA and an inherited 403B account
For administrative ease – can I consolidate these two into a single inherited IRA
in other words can I roll the inherited 403B to the inherited IRA
original account holder is late sister of client
client has listed her husband and chidren as beneficiaries on the accounts
we are making distributions based on the client’s life expectancy
Thanks.
Permalink Submitted by Alan Spross on Tue, 2009-11-24 03:28
Yes, the 403b can be transferred to the inherited IRA account because each account was inherited from the same decedent. However, if there was any delay in taking RMDs or any other reason that would make the RMD divisor different for the two accounts, then they cannot be combined without effectively causing the higher RMD to apply to the entire amount.
Another option to consider is that the 403b can be converted to an inherited Roth IRA, whereas the inherited IRA cannot. If beneficiary needs a source for Roth assets, the 403b should be considered. Of course, RMDs will still be required whether the inherited account is a Roth or a TIRA.
Permalink Submitted by Brent Steiner on Wed, 2009-12-02 03:32
Alan,
I have a similar situation – client inherited a 403(b) as a non-spouse beneficiary, took RMD’s in 2008 – suspended them in 2009 but now wants to roll this out of TIAA Cref. Even though TIAA is saying that their plan does not allow for Roth Conversions – can he go to an inherited IRA first and then do a conversion to an inherited Roth?
Permalink Submitted by Alan Spross on Wed, 2009-12-02 04:11
No, the client cannot get to an inherited Roth by first transferring to an inherited TIRA. The basic reason that an inherited TIRA cannot be converted to a Roth is the rule that no rollovers are allowed from an inherited TIRA. A conversion by definition is a distribution and rollover.
However, if TIIA Cref is willing to transfer to an inherited TIRA before next year when they have no choice, it proves that they offer transfers to inherited IRAs, so it is strange that this would not include an inherited Roth IRA.It might be worth checking to see if this will change after the first of the year when such transfers should be mandatory. Of course, in 2010 the RMD would have to be withheld from the transfer, but it would have to be taken out by 12/31/2010 anyway.
It is probably worth it to take the time to explore that option if a Roth is considered more beneficial than getting the transfer done before the end of this year and foregoing the Roth permanently.
Permalink Submitted by Brent Steiner on Wed, 2009-12-02 16:12
I called a new custodian (American Funds) – they said they can transfer an inherited 403(b) from TIAA Cref to them as an Inherited 403(b) – then do a conversion to an Inherited Roth once it is transferred out of TIAA to American –
Can I do this? American says I can as long as it has been no longer than 4 years from the Date of Death. Is this a valid work around?
thanks