Inherited IRA and Keough

Submitted by Ryan Smith on Mon, 2018-11-26 18:07

A client (non-spouse) has inherited both an IRA and a small keough plan in 2018. The decedent was 60 at time of death. The client/beneficiary is 55. To satisfy the RMD requirements for both accounts, could distributions from the Keough be used to satisfy the RMD requirement for the IRA? She would like to cash out the Keough but if the distribution satisfies the RMD for the IRA, she might want to wait until 2019.



Submitted by Alan - IRA critic on Mon, 2018-11-26 20:25

Inherited IRA accounts from the same decedent can be aggregated, but a Keogh plan is not an IRA and therefore, the RMDs must be taken separately from each of these two accounts.

Submitted by Ryan Smith on Wed, 2018-11-28 19:12

Could she rollover the inherited Keogh to the inherited IRA.  They are from the same decedent.

Submitted by Alan - IRA critic on Wed, 2018-11-28 20:05

  • Yes, the Keogh balance would have to be transferred to the inherited IRA as a direct rollover. A Keogh is considered a qualified plan by the IRS and is therefore one of the plan types eligible to be directly rolled over into an inherited IRA as long as the non spouse beneficiary is specifically designated or the beneficiary of a qualified trust named as a beneficiary of the Keogh. In short, this is the same capability that a beneficiary of an inherited 401k would have. 
  • Because many Keogh plans have not been updated for years with respect to RMD language, the client should try to get this direct rollover done before year end. If not, then definitely before year end 2019 since the end of the 2019 would lock in any RMD requirement of the Keogh (perhaps the 5 year rule). If that occurred the Keogh could not be combined with the inherited IRA and the RMDs could not be aggregated. Doing the direct rollover before year end 2018 will eliminate having to keep the RMDs separate for 2019 since the 2019 beneficiary RMD for the Keogh would have to be distributed for any direct rollover done after 12/31/2018. 

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