Combine Inherited IRA with proceeds from non-spouse state retirement plan
I have a new client who is settling her deceased mother’s estate.
Her mother passed away at the age of 63 approximately 60 days ago and the daughter who is 38 is named as beneficiary on both of her mother’s traditional IRA and her mother’s state employee retirement plan.
The state agency has provided the daughter with documents to rollover the proceeds into an IRA.
The current TRAD IRA Custodian has changed the titling of the TRAD IRA to a inherited IRA.
Are there any special consideration(s) to make before combining the state retirement plan proceeds into the inherited IRA?
Permalink Submitted by Alan - IRA critic on Tue, 2015-12-01 18:40
If she wanted to, she could convert the state retirement plan to an inherited Roth IRA, but of course that would be a taxable event. She cannot convert the inherited IRA, and obviously if she converted the state plan it would be in an inherited Roth IRA instead of combined with the inherited TIRA. Otherwise, she can combine both accounts in an inherited IRA as long as her mother owned the IRA originally and it was not already inherited from someone else. The reason for that is because the RMD divisor must be the same if you combine them and it would not be the same if her mother had already inherited the IRA. Client’s first RMD would be due before 12/31/2016 and calculated using the 12/31/2015 balance.