Inherited IRA

Submitted by Michael Porfido on Tue, 2013-12-10 17:01

We have a client who inherited an IRA from her Mother. Her mother’s IRA was set up with Morgan Stanley as beneficiary. The inherited IRA account is now set up in a Morgan Stanley account with our client shown as beneficiary. Apparently there was a five year payout election made on this account. If we transfer it to another IRA BDA with a new custodian can we set it up under the stretch provision?

Also, are there any distribution requirements on an inherited Roth IRA?

Thank you.



Submitted by Alan - IRA critic on Tue, 2013-12-10 17:17

  • Not sure I understand the original IRA “set up as beneficiary”. Did her mother herself inherit the IRA or was the client the first person to inherit the IRA?
  • Whoever the original owner was, what was their age at death?
  • A non spouse inherited Roth IRA is subject to RMDs using the same rules as an inherited TIRA except that the decedent is always deemed to have passed prior to the required beginning date (since there is NO required beginning date)
  • Please provide additional info relative to restoring the life time stretch.

 



Submitted by [email protected] on Tue, 2013-12-10 21:14

So it was her Mother’s IRA originally and our client is the first to inherit it. The Mother was age 66 when she passed.



Submitted by Alan - IRA critic on Wed, 2013-12-11 03:03

According to PLR 2008-11028 the beneficiary can restore the life expectancy stretch by making up all the missing RMD and paying the 50% penalty on the delinquent years. In addition, there is no risk to requesting a penalty waiver on Form 5329 as well. I assume that her mother’s death was not over 5 years ago. Note that 2009 RMDs were waived so no need to make up that one.



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