Inherited IRA to Traditional IRA
I spoke with an individual who has an Inherited IRA that was set-up for them when their Spouse passed away. They were not aware at the time that they had the option of making it their own IRA in lieu of setting-up the Inherited.
They would like to move the IRA over and were told that the Inherited IRA (from spouse) could be transferred directly into their own IRA. Is that possible and can an IRA be converted at any time to their own if it was inherited from spouse?
Thanks!
Permalink Submitted by Alan - IRA critic on Wed, 2024-08-07 15:40
Yes, and if the spouse is the sole beneficiary the best way to do that is to elect to assume ownership of the inherited IRA, since an assumption is non reportable by the custodian or on the tax return, and in addition the RMD for the year ownership is assumed ( if after the year spouse inherited the IRA) is from the Uniform Table using the age of the surviving spouse.
Further, note that if the surviving spouse in any prior year failed to complete the RMD for a beneficiary, they automatically default to ownership status, so it’s possible that the spouse is already the owner and just needs to have the registration updated to reflect that.
In answer to your question, it might be possible to do a transfer from an inherited IRA to an owned IRA without a 1099R, but there is no reason to take that chance. Better to assume ownership of the inherited IRA first, then do the transfer from owned to owned.
Permalink Submitted by Brian Bishop on Wed, 2024-08-07 16:59
Awesome. Thanks for the advice and feedback!