Can Estate direct rollovers to inherited IRAs for Estate beneficiaries?
Estate is beneficiary of TIRA and 3 adult individuals are beneficiaries of the Estate.
Can the Executor of the Estate authorize and direct the TIRA custodian to rollover the TIRA into 3 inherited TIRAs for the 3 estate beneficiaries?
If so will the 3 beneficiaries be eligible for the 10 year RMD period?
If not will the Estate have to kept open for 5 years to take advantage of the 5 year RMD period?
Thanks in advance for any comments.
Permalink Submitted by Alan - IRA critic on Fri, 2021-07-02 23:32
The executor can assign the inherited IRA out of the estate to the estate beneficiaries. They will each have their own IRA account and the estate can close, but this does not change their RMDs. If IRA owner passed prior to RBD, the 5 year rule applies, otherwise the distribution period is the remaining LE of the decedent. Note that some IRA custodians balk at accepting assignment from the executor even though they know that this is OK with the IRS. That might force a transfer of the inherited IRA to a more cooperative custodian to get the assignment accepted.
Permalink Submitted by John Peterson on Mon, 2021-07-05 20:20
Alan- can you provide a citation for the statement “this is OK with IRS”. I’m dealing with one of the balking custodians you mention. Many thanks.
Permalink Submitted by Alan - IRA critic on Mon, 2021-07-05 23:48
Here is an article from Natalie Choate that summarizes this continually annoying situation. I am not aware of any PLRs denying assignment, but much of the issue is that the IRS has not generally addressed assignment either way:
Can a Trust Transfer an IRA to a Trust Beneficiary? | Morningstar
The custodian here may not really be interested in specific PLRs, but rather is stonewalling, hoping the account is transferred out to another custodian.
In certain cases, a case can be made for keeping the estate open if the distribution period for the estate is short enough (5 year rule) in order to offset other estate expenses and pass through reduced taxable amounts to beneficiaries on a K 1.