Inherited IRA

Submitted by Robert McLaren on Thu, 2023-09-14 14:05

Decedent was a Pennsylvania resident. Decedent passed away with no named beneficiary for his IRA. Executor has had custodian transfer IRA account title from decedent’s name and Social Security number into estate name and EIN. No distributions have been made to date.

Estate’s attorney is advising that the IRA must be distributed to the estate and the estate must recognize the taxable income. Custodian of IRA has stated that the IRA can be split into separate accounts for each beneficiary of the estate, who will then recognize income.under non-spouse inherited IRA distribution rules. I am looking for the correct answer as well as the authoritative citation.



Submitted by Alan - IRA critic on Thu, 2023-09-14 14:33

  • Neither is exactly correct. The IRS has always allowed the executor to assign the inherited IRA out of the estate to the estate beneficiaries as separate inherited IRAs. Most, but not all IRA custodians will cooperate, but the custodian is this case will. However, this assignment out of the estate does not change the RMD requirements for the individuals. If the decedent passed prior to RBD, the 5 year rule will apply to each inherited IRA and if the decedent passed after RBD, the remaining life expectancy of the decedent based on their age in the year of death will apply and there will be annual beneficiary RMDs required.
  • The estate attorney may not understand the above or may want the IRA funds to pay estate expenses, final bills, taxes, etc. The estate is also responsible for completing the year of death RMD of the decedent if decedent passed post RBD and did not complete it before passing. However, if this RMD can also be satsified by the beneficiaries in any combination from their inherited IRAs if no distribution is made to the estate. Again, the estate is not required to receive any distribution prior to assignment, but the attorney may want the flexibility of using part of the IRA funds to settle the estate, and is not explaining his reasons clearly.


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