Inherited IRAs with or without beneficiaries

Submitted by Kirill Vorobeychik on Mon, 2023-11-20 18:47

A client in her 40s inherited 2 different IRAs from her mother in 2022, when the mother was 80.
1 IRA had the client and her 2 sisters as beneficiaries listed, but the other IRA had noone listed and thus went to “the estate”. Given that now, in 2023, the mother’s “phantom” life expectancy is 10.5 years (phantom age 81) and thus is very close to the standard non-spousal distribution schedule of 10 years, is it legitimate to combine the 2 IRAs into one account and amortize it over 10 years? Obviously, that time frame should satisfy both distribution schedules, but the question is whether there are some administrative/legal restrictions requiring to keep the 2 amounts separate.
Appreciate qualified advice here. Thanks!



Submitted by Alan - IRA critic on Mon, 2023-11-20 19:46

  • What has occurred since mother’s death?  Have separate inherited IRA accounts been created for the 3 designated beneficiaries, and has the executor assigned the estate inherited IRA to separate inherited IRAs for the estate beneficiaries?  Was mother’s 2022 RMD timely completed by mother or by the beneficiaries?
  • The annual beneficiary RMD will be much higher for the estate inherited IRA, with an initial divisor for 2023 being 10.2 with annual divisor reduction of 1.0. Therefore, this inherited IRA will be roughly equally distributed over 10 years. 
  • Conversely, the designated beneficiary RMDs will be based on the age of the respective beneficiary if separate inherited IRA accounts are created by the end of this year. These RMDs will be much lower in years 1-9 than those of the estate inherited IRA. Therefore, the beneficiaries should not combine the inherited accounts and must compute the annual RMD separately.
  • The IRS has not stated what happens if accounts with different RMD divisors are combined. The logical result would be that the higher RMD% would apply to the entire combined account, but the IRS has not provided direct guidance on this issue.
  • If equal annual distributions are required, this can be done by exceeding the annual RMD for the desigated beneficiary inherited IRA by taking a ratable distribution, resulting in roughly equal annual distributions over the 10 year period for each of the inherited IRAs.


Submitted by Kirill Vorobeychik on Mon, 2023-11-20 21:35

Thanks for the quick reply!!!In order:- separate inherited IRA accounts were for the 3 designated beneficiaries in 2022. The estate inherited IRA was NOT established in 2022. The latter was only distributed to individual beneficiaries (at the end of probate process) a few months ago, in 2023. Throughout 2022, that account still stayed under the mother’s name as traditional IRA. No RMDs were taken in 2022 from either beneficiary or mother’s accounts.- if a client’s tax bracket is a expected to stay relatively high throughout the next 10 years, doesn’t it makes sense to distribute equal amounts (10 chunks basically), rather than back end into year 10?- and if the above is true, then we can keep the accounts combined, correct? 10.2 and 10 divisors are essentially one and the same thing, so if we are distributing 1/10th of the inherited account, that automatically should satisfy the estate account as well, correct?Thanks again!



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