Children Inheriting Parent’s IRA
I have two clients that have been told by two different advisors (CPA/ATTNY)… that if their adult children are listed as the primary beneficiary, on their Traditional IRA, upon the parents death, the children can do a direct rollover of the IRA into their own IRA.
This goes against everything I know and have experienced. Is there new legislation that is now law that I am unware?
Please list the options available currently to confirm I have correct information.
Permalink Submitted by Alan Spross on Sat, 2008-08-16 00:21
Tom is correct and both you and he are more knowledgeable than either that CPA or attorney if this was communicated correctly. In fact, this issue is basic enough that it is very possible that your client misunderstood his sources.
The only change of IRA custodians they can make is via direct transfer to an inherited IRA, properly registered showing their beneficiary interest and also showing the decedent. If they were to receive a check from the inherited IRA, those funds become taxable and are not subject to rollover. If the beneficiaries directly transfer their interest to a beneficiary IRA prior to 12/31 following the year of death, they will each be able to take RMDs over their own remaining life expectancies.