inherited IRA ??
So here is a new one I am working with. I have a divorced couple. The ex husband recently was bequeathed an inherited IRA and ROTH IRA from a family friend. I know you can’t transfer ownership of inherited IRA in most situations but apparently a new rule states that if the court allows it, a divorced husband can transfer his inherited to the ex wife to help meet part of the money he agreed to leave her in the divorce. And Vanguard said that this could be done as long as deceased name stayed on it and stays an inherited IRA and that the ex wife must meet the 10 year rules followed by any inheritor who got an IRA after the deceased hit their RMD.
Do you agree with this and have you heard of such an occurrence??
Permalink Submitted by Alan - IRA critic on Wed, 2024-08-21 18:57
I am not aware of any IRS regulation allowing a beneficiary IRA that did not exist at the time of divorce to be awarded to their ex, i.e. treated as if it had been inherited prior to the divorce. But if VG is willing to change the name of the beneficiary and the SSN on the inherited IRA, the IRS is unlikely to question this change or even become aware of why the beneficiary was changed. If allowed, I agree that the RMDs would continue to be the same as would have applied to the ex husband if he had retained the inherited IRA.
Vanguard is usually very conservative, so they might be aware of an IRS PLR or court decision, although court decisions do not necessarily override the tax code.