Inherited 401k to existing Inherited IRA
Can a client transfer an Inherited IRA from her father into an existing Inherited IRA that was already established from the father’s Traditional IRA? The beneficiary of both accounts was the daughter and the father was the owner of the 401k and IRA. My understanding is that as long as the beneficiary and decedent are the same that the Inherited 401k can be directly transferred into the existing Inherited IRA; however, Schwab is telling us that the Inherited 401k must be transferred into a “new, separate Inherited IRA”. Does this makes sense? Thank you!!
Permalink Submitted by Alan - IRA critic on Wed, 2025-06-18 16:50
Schwab is probably protecting themselves against contingencies that would result in the RMD being different for these accounts. For example, that could occur if the father was still working and passed prior to RBD, but after RBD for the IRA. That might also happen if daughter was an EDB due to disability and the 401k used the 10 year rule and the IRA used life expectancy.
But once the RMD method for both accounts have been confirmed as identical, there is no reason that they could not be combined. If Schwab will not do this even if the RMD method is the same, she could still aggregate the beneficiary RMDs over both account if she wanted to.