Inherited IRA

Submitted by Larry Szczepanski on Wed, 2016-11-09 15:46

Client passed away at age 65.
Owned 2 IRAs.
One for $60,000 and the second for $180,000.

Spouse is 43.

Wants to open her own IRA to continue deferral.

Deceased’s IRA registration was changed to a Beneficiary IRA for her.

She then liquidated and intends to roll into own IRA indirectly.

Intends to do same with second IRA.

Under impression indirect rollovers cannot be done with Inherited IRAs.
and she would be doing 2 within 12 months.

Is this so? Need clarification please

Permalink Submitted by Alan - IRA critic on Wed, 2016-11-09 22:30

Yes, that is correct. The one rollover limitation per 12 months applys to amounts an individual receives from an IRA whether inherited from a spouse or owned. Client therefore can do only one rollover in a 12 month period.
If client were to keep some portion in inherited status, there would be no beneficiary RMDs for 5 years, yet if spouse needed funds for living expenses, they could get them without a penalty. With a rollover to her own IRA, there will be a 10% penalty on amounts distributed before 59.5.
Even after the 5 years when a beneficiary RMD would be needed, it might be wise to maintain some portion as inherited in order to tap the IRA penalty free.