Inheriting and Inherited IRA

Submitted by Walter Gonzalez on Fri, 2018-04-20 13:59

Hi,
Have clients with the following scenario.
Daughter passed away and left her IRA to both mother and father 50% each.
Parents establish inherited IRA accounts. Now the father passed away.
Can the mother combine the inherited IRA accounts originally from the daughter into one? Mother is 74, father was 77.



Submitted by Alan - IRA critic on Fri, 2018-04-20 15:15

Mother cannot combine them for two reasons. First, the RMD divisors are different with the account for which father was the beneficiary having RMDs based on his age, and that must continue. Mother’s inherited IRA RMD divisor is based on her age. Both divisors are reduced by 1.0 each year. Put another way, the RMD amount on the inherited IRA from father will continue to be the same as if he was still living. The second reason for not combining is the IRS’ recommended titling format will call for father’s inherited IRA to be retitled with mother as beneficiary of father, not mother as beneficiary of daughter.

Submitted by Walter Gonzalez on Fri, 2018-04-20 17:40

Thanks!

Submitted by Janette Gut on Wed, 2018-04-25 15:56

Advice from Fideltiy: Since RMD had not been taken out of the IRA before IRA owner’s death, it becomes part of the IRA Trust with the RMD being split between the 6 grandchildren beneficiaries.  The tax rate is based on the Trust for this year’s RMD.  Fidelity withheld 10% Federal and the Ohio required amount.  It was suggested that we ask a CPA what the Trust rate is for a trust and have Fidelity withhold the difference. After re-reading the ‘Parlay’ book regarding distributions, there seems to be some conflicting information.  Ed Slott is saying that the whole RMD should be paid out to the beneficiaries so that they can pay taxes based on their own rates.  If left in the Trust, then the Trust will pay at its rate.  Could this be an old IRA rule that has since been changed? The book is about 10 years old. How should this year’s RMD be distributed and taxed?

Submitted by Bruce Steiner on Sun, 2018-04-29 01:47

  • What are the terms of the grandchildren’s trusts?
  • If the Will or trust agreement was well drafted, the trustees will have discretion to distribute some, all or none of the income and principal of the trust.  If that’s the case, the trustees will have to consider all of the facts and circumstances, including income taxes, in deciding how much, if anything, to distribute each year.
  • Bruce Steiner

  

Submitted by Janette Gut on Wed, 2018-04-25 15:57

I meant to pose a new question.

Add new comment

Log in or register to post comments