Splitting Inherited IRA
I have read some conflicting information about splitting an inherited IRA and was hoping someone could clarify.
If an IRA names multiple non-spousal beneficiaries (e.g. children) and the deceased account owner had already started taking required withdrawals prior to death, is splitting the IRA into separate IRAs (with each subject to its own beneficiary’s life expectancy) still possibile?
I have read a couple of sources that suggested such a split can only be done prior to RBD.
Thanks!
Permalink Submitted by Marvin Rotenberg on Wed, 2008-12-17 16:53
If the inherited IRA is split for each beneficiary prior to 12/31 of the year after death each beneficiary could then use their own lif expectancy. Regardless whether the decedent IRA owner was in pay status (701/2) or not.
Permalink Submitted by Al Fry on Wed, 2008-12-17 16:57
Yes, it can be spit into separate shares if done prior to 12.31 in the year following death. It is adviseable to do it by 9.30, the date on which benes are determined. Some may want to cash out.
Permalink Submitted by Alan Spross on Wed, 2008-12-17 19:02
I agree.
And if it is too late to meet the 12/31 deadline in the year after owner’s death, it is still better to create separate accounts just for better control of investments and to establish some independence from the other beneficiary. If this is done after the deadline, the life expectancy of the oldest beneficiary will still have to be used for both accounts.
If there is any doubt about the siblings getting along or meeting the deadline for separate accounts, some IRA owners are establishing the separate accounts themselves, each with it’s own beneficiary. You might even populate these accounts with investments that are suited to each beneficiary’s risk tolerance. However, it will drive you nuts if you try to keep the amounts in these accounts equal unless you keep them mirror images of each other. Barring a somewhat unique beneficiary problem, this is a little too much of a hassle for most IRA owners.