IRA trustees wipe out an inherited IRA — their own

Imagine spending a lifetime building a retirement account only to have your beneficiaries lose it in one fell swoop: They mishandle the account, triggering tax on the entire inherited individual retirement account. This is a real-life horror story described in a recent private letter ruling released by the IRS on June 25.

Advisers can learn from this and help clients and their beneficiaries preserve their retirement savings by avoiding what happened here. It comes down to this basic tax rule for inherited retirement accounts: A non-spouse beneficiary cannot do a rollover; only a spouse beneficiary can do that.