Bene IRA ?
I have a new client who was recently widowed and under age 45.
Her previous advisor took one of the IRAs that she inherited from her husband and made it a bene IRA versus a traditional. So now she has a traditional and a bene IRA.
Can I combine the two IRAs into 1 traditional? Also, why would someone do this?
Thanks.
Mike Sicuranza
Permalink Submitted by Anonymous (not verified) on Thu, 2010-11-04 16:44
The two can be combined, because the spouse always has the ability to “assume” after inheriting (never the other way around). The process might be easiest to first assume (a transfer – no tax reporting) into a TIRA and then combine the two again through an asset transfer. I made the assumption they are at separate custodians. Ofcourse a distribution out of Inherited IRA and 60-day rollover to TIRA will also work.
The advisor probably let her inherit one so she as the ability to take penalty-free distributions for the next 14.5 years. She can not do that without an IRS exception out of a TIRA until 59.5. So I don’t see a reason to combine them. There is no RMD due on the Inherited IRA until the year the deceased spouse would have turned 70 1/2, which is probably longer than 14.5 years. After turning 59.5 she can assume and combine them.
Bottom line, why not preserve the ability to take penalty-free distributions for free. Unless she is 100% sure she will not need the money or there are investment/account/fee related issues at stake, I would leave it as is.
pko