Post Secure Act BDA question

Submitted by Kevin O'Hearn on Tue, 2022-11-08 18:15

Hello,

I have a client Eileen who has an IRA BDA and has passed away, the primary beneficiary on Eileen’s account is Jack who has an IRA BDA set up with the same original depositor Jennifer. Jennifer was Eileen and Jack’s daughter, she and Eileen passed away in the same year 2022. Is it possible to have the IRA BDA for Eileen be transferred to the IRA BDA for Jack? Or should Jack create an additional IRA BDA for the assets he is inheriting from Eileen. I wasn’t sure if Jack cold commingle the IRA BDA assets in one IRA BDA account since the original depositor is the same.

Thank you.



Submitted by Alan - IRA critic on Tue, 2022-11-08 18:47

  • Combining should be avoided, for two possible reasons. First, if Jack’s BDA RMD divisor differs from Eileen’s divisor then it will continue to differ after Eileen’s passing, and only a single divisor applies to an account. Second, the IRA custodian might well register the twice inherited IRA differently than the once inherited IRA for Jack. The IRS 5498 instructions suggest that the twice inherited IRA should be titled “Jack as beneficiary of EIleen” and the original owner’s name is dropped. Therefore, Jack should maintain two separate inherited IRA accounts.
  • While the IRS has not provided guidance, if two inherited IRAs with different divisors are combined, the logical result would likely be that the lowest divisor would apply to the combined account. Perhaps Jack would not mind having the RMD increase for that reason in exchange for the simplicity of a single account, but there is still the titling issue.

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