inherited IRAs
Client had IRAs at Bank A and Brokerage B. Both IRAs had his living trust as the beneficiary.
Upon his death, is there anything to prohibit the trustee from combining both IRAs into an inherited IRA at Bank C?
Client had IRAs at Bank A and Brokerage B. Both IRAs had his living trust as the beneficiary.
Upon his death, is there anything to prohibit the trustee from combining both IRAs into an inherited IRA at Bank C?
Permalink Submitted by Alan Spross on Wed, 2010-01-27 22:53
They could be combined only by TT to TT transfer assuming the following:
1) Same trust as beneficiary
2) Trustee of trust acted or will act by the deadline to preserve the qualified (for look through) status of the trust for each IRA custodian.
3) Source of the inherited IRA accounts do not differ in a way that would result in different RMD requirements for each IRA.
#3 will need some clarification by example. Assume client had a bank IRA with the qualified trust as beneficiary. In addition client had 401k plan with the trust as beneficiary but the trustee failed to or was not allowed to transfer the plan to an inherited IRA by the end of the year following client’s death and as a result a 401k plan provision which required the 5 year rule (death prior to RBD) carried over to the inherited IRA when the plan assets were finally transferred to an inherited IRA. There would then be two inherited IRAs with different RMD requirements and in that case should not be combined. Unlikely but possible with all the portability changes in recent years.