Inherited IRA to Rollover IRA – same owner

Submitted by Vickie Intriago on Tue, 2024-11-05 11:40

10 years ago I opened an Inherited IRA for a client who was widowed since he was younger than 59 1/2.

He is now 59 1/2 years old and I want to move the INherited IRA to client’s own Rollover IRA so that we can eventually do Roth Conversions.

According to Pershing, transferring assets from an inherited IRA to an existing IRA is considered by the IRS to be a distribution. A distribution is a taxable event.   My plan was to do a trustee to trustee transfer .

Is this true?

 

 

 

 

 



Submitted by Alan - IRA critic on Tue, 2024-11-05 13:14

A direct transfer is not reportable as it is not a distribution. A sole surviving spouse beneficiary should acquire ownership by advising the IRA custodian that they are electing to assume ownership of the inherited IRA. The custodian will then usually transfer the balance into an owned IRA and this is not reportable on a 1099R or on the SS’s tax return. It also does not use up the one permitted indirect rollover for a 12 month period.

Pershing is sharp, but not all their front line reps are, so this may have been a misunderstanding.

Submitted by Alan - IRA critic on Tue, 2024-11-05 13:20

A direct transfer should be allowed by Pershing. They might better understand if the sole spouse beneficiary simply advises Pershing that they are electing to assume ownership of the inherited IRA. Pershing should then transfer the balance into an owned IRA account there, after which the SS can do another direct transfer to a different custodian if desired.

Assumption of ownership is not a distribution, not reported on a 1099R, or on the taxpayer’s return. It also does not use up the one allowed 60 day rollover.

Possibly, they thought that you were asking something different, but what you asked for is essentially the same process as an assumption, so should never have viewed as a distribution.

Submitted by Alan - IRA critic on Tue, 2024-11-05 13:24

What you asked for is not a distribution and they may have misunderstood the request.

Try again with a request to assume ownership of the inherited IRA. They should then transfer the balance into an owned IRA there as a non reportable transfer, not a distribution. There should be no 1099R or need to report this on the tax return. Once in an owned IRA at Pershing it could be directly transferred again to a new custodian’s IRA including an existing rollover IRA.

Submitted by Alan - IRA critic on Tue, 2024-11-05 14:39

The sole surviving spouse should elect to assume ownership of the inherited IRA.

Submitted by Alan - IRA critic on Tue, 2024-11-05 16:12

ssssssssssssssssssssssss

Submitted by Alan - IRA critic on Wed, 2024-11-06 15:10

This is not a distribution and the Pershing rep may have misunderstood the rules. Client should advise Pershing that he has elected to assume ownership of the inherited IRA. This is not a distribution and it is not reportable. They should transfer the inherited IRA balance into an owned IRA at Pershing, which can then be transferred again to client’s rollover IRA with that custodian.

 

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