Inherited IRA
IRA owner died 1/9/2012 at age 57 (DOB 10/30/53) and had not taken any distributions. He had 6 total IRAs (2 had no named ben. 4 had his brother 50% {DOB 4/28/61}, and sister 50% {DOB 10/30/53}). Each IRA was at a different IRA custodian. Each beneficiary would like to consolidate their proportional share of the 4 IRAs to one inherited IRA each and extended tax deferral as long as possible. My understanding is that they could do this as long as it is done as a trustee to trustee transfer and pick the option to stretch the IRA.
Just wanted to make sure I’m understanding the rules…. Thanks
Permalink Submitted by Alan Spross on Wed, 2012-04-18 18:39
With respect to the 4 IRA accounts with named beneficiaries:
1) Separate inherited IRA accounts need to be created no later than 12/31/2013 for each beneficiary to use their own life expectancy for RMDs starting in 2013
2) Each beneficiary can consolidate these 4 inherited IRAs into one inherited IRA if they create the separate accounts by the deadline AND intend to use the same RMD method for the consolidated account. In other words, if they are going to choose the 5 year rule for any of the 4 accounts and life expectancy for the others, they cannot be combined. They can also consolidate if they miss the separate account deadline, but the life expectancy in that case would be that of the oldest of the two beneficiaries.
Any movement of funds MUST be by direct trustee transfer.
You did not ask about the other two accounts, but since they had no beneficiary the first thing to do is check the IRA agreements to determine who the default beneficiary is. In most cases it will be the estate, but not always. If the estate is the default beneficiary, the 5 year rule will apply for RMDs. The executor of the estate can have these IRAs assigned to each estate beneficiary and the two inherited IRAs could be combined, but not with any of the 4 IRA accounts with designated beneficiaries. The 5 year rule applies no matter what they do with these two accounts.