IRA-BDA questions
I have inherited an IRA-BDA and was a named benificiary, along with my other siblings. I am a child of the original IRA holder. I have a couple of questions I would really appreciate your answering. The bank handling this account is not helpful.
Can the life-expectency chart for required minimum distributions be from my date of birth, or does it have to be the oldest child?
Can I roll this account over to a regular IRA in my name via a trustee to trustee transfer to another institution?
Can I roll this account over to a self-directed IRA?
Can I trade stocks with this IRA-BDA, and will any gains be tax-deferred (until I take distributions)?
Thank you so much for your time and answering my quetions.
Permalink Submitted by Alan Spross on Sat, 2008-03-22 05:16
If separate beneficiary IRA accounts are created for each of you no later than 12/31 following the year of death, you can each use your individual non recalculated life expectancy for your RMDs. If the account remains with all the beneficiaries beyond that date, the life expectancy of the oldest must be used for all beneficiaries from that point on, even if separate account are created later. The table that applies is on p 88 of Pub 590.
It is important to know that you can change IRA custodians, but ONLY be direct transfer, NOT by rollover. The IRA must remain registered in beneficiary form, and cannot be made anyone’s own IRA account. The proper title format includes the name of the decedent as well as the beneficiary, and tax reporting is done under each beneficiary’s SSN according to the amount of funds withdrawn by each.
Each beneficiary can invest their account as they see fit including finding a discount broker to serve as IRA custodian. Remember that an RMD must be taken for each and every year following the year of death, but more than the RMD amount can be taken if desired. Like any IRA, taxes are incurred only when funds are distributed, not on internal gains within the beneficiary IRA account. Each beneficiary should name their OWN successor beneficiary ASAP in case something happens to them.
Permalink Submitted by Bree Phoenix on Sat, 2008-03-22 06:48
Thank you. If it has to remain in IRA-BDA form (and not my own IRA), does that mean I can’t ever make it a self-directed IRA?
Permalink Submitted by Alan Spross on Sat, 2008-03-22 20:56
No, you can still control the account by changing to a self directed IRA specialist custodian (by direct transfer only) or other custodian that meets your needs. Investment choices in an inherited IRA are no different than in an owned IRA account.
The main restrictions you will have with an inherited IRA are:
1) You can only move it by direct transfer
2) You must take RMDs every year for a non spouse inherited IRA
3) You cannot add contributions to the IRA account
4) You cannot convert it to a Roth IRA