Aggregating Inherited IRAs (non-spouse)
Good Morning
Interesting fact pattern that I have not come across. Assistance needed.
FACTS:
T-IRA owner #1 (brother), < 70.5 died in 2012
sibling “Tom” 100% sole primary beneficiary
sibling set-up an inherited IRA and took initial RMD in 2013
T-IRA owner #2 (mom) died in 2013, > 70.5 – took her RMD prior to passing
same beneficiary “Tom” as above
Tom, incorrectly (in 2014) merged inherited IRAs from the two different decedents together. The merger was done prior the RMDs being taken. He still needs to take a 2014 RMD from both accounts (using different factors)
I am unsure of the proper correction method. What is the proper way to “unwind” the merger?
Thank you
Permalink Submitted by Alan - IRA critic on Fri, 2014-12-19 16:10
There is no specific IRS guidance on this question. Since the decedent must be shown on the non spouse inherited IRA, I don’t know how the custodian allowed the combination since the title cannot show two different decedents. Sounds like there have been no distributions since the combination took place, so I would recommend requesting that the IRA custodian partition the account into two properly titled inherited IRAs, each showing the respective decedent. The IRS has approved a non taxable transfer in the past to correct an inherited IRA titling error if no distributions have been taken. After the combination the proper proportion of gain or loss should be included in the calculation of the amount to transfer to the new IRA. Then he can take his 2014 RMD separately from each IRA. Note that his RMD divisors will be slightly different for each account because the divisor reduction of 1.0 started one year earlier on his brother’s IRA. Be sure that Mom’s IRA was owned and not maintained as an inherited IRA from Dad or similar as that would have a major affect on the RMD divisor.