How to Correctly Merge 3 Inherited IRA Accounts
I have 3 inherited IRA accounts.
I had missed 7 years of distributions on them, but last year took them out and did a form 5329 and received statements from the IRS saying that the penalty has been waived for all years.
However, I would prefer to merge all of my accounts. I have not yet taken my 2018 distribution for each account, will be scheduling my distributions for this year based upon my life expectancy soon.
What are the steps to take to avoid incorrectly merging my accounts?
Should I merge my accounts after I take out my 2018 RMDs?
Would it raise any red flags for the IRS or not be a good idea to merge my accounts, since I’ve recently taken out the 7 years of missed rmds from 2 accounts and been forgiven?
Permalink Submitted by Alan - IRA critic on Thu, 2018-06-21 22:35
No red flags, however you can only combine the accounts if they were all inherited directly from the same original IRA owner AND they will have the same RMD divisor. If so, you can combine them by direct transfer either before or after you complete your 2018 beneficiary RMD. Obviously, you should also verify that your own beneficiary on the account into which the others are combined is correct.
Permalink Submitted by A S on Fri, 2018-06-29 01:45
Not sure what you mean by the same RMD divisor? My single life expectancy divisor will be the same on all. They are all from the same original owner. I was the original beneficiary on all. I inherited them in different years.I read that there are ways an inherited IRA can be incorrectly transferred, so I want to avoid any mistakes.
Permalink Submitted by Alan - IRA critic on Fri, 2018-06-29 02:26
If they were inherited from the same original owner, how could you have inherited them in different years? Note that you inherited the IRAs upon the death of the owner even if you did not know of the death or of the account. While you cannot transact anything on the IRAs until you have them re titled, you still inherited them when the owner passed. Given the info you provided the divisor would be the same for all unless there were other beneficiaries on a account in addition to yourself and separate inherited accounts for each beneficiary were not created by the deadline of 12/31 of the year following the year of owner’s death.
Permalink Submitted by A S on Wed, 2018-07-04 04:38
Yes, my divisor for all of my rmds is based upon my age and I am the sole beneficiary.None of them are roth IRAs, they are all IRAs, although I’m not sure if an IRA and a 401k are treated differently?I meant I received them in different years 2 of them 2 years after her death because I did not know of the accounts and didn’t start the process until later.Someone told me that I need to take my 2018 RMD amount separately from each of the 3 inherited IRAs before merging them, is this correct?Also, would it be better to roll them over or do a trustee-trustee transfer?Once I transfer and consolidate 2 of the IRAs to one, can I ever move my inherited IRA to a different financial company even if the IRAs were not originally held there?
Permalink Submitted by Alan - IRA critic on Wed, 2018-07-04 15:47
What you were told is not correct assuming these IRAs were inherited from the same original owner. You can take the RMD from any of the accounts assuming they have the same divisor, and this includes any late RMDs from prior years. Since you can aggregate these RMDs and can only move funds to another custodian through a direct transfer, you can do these transfers without taking a beneficiary RMD before the transfer. You can do such transfers without limit anytime you choose. Again, you CANNOT do a 60 day rollover since any distribution you take is irrevocably taxable and not eligible for rollover.