Inheriting More Than One IRA: What You Can and Can’t Do

By Beverly DeVeny, IRA Technical Expert

Follow Me on Twitter: @BevIRAEdSlott

What happens when you or your client inherits more than one IRA? Can they be combined into one account? Do you have to take required minimum distributions (RMDs) from each account separately or can the distributions be aggregated?

The answer will depend on who the inherited account came from as well as what type of account it is.

You can only combine accounts that are inherited from the same person. If you inherited three IRAs from Dad, you can combine them into one inherited IRA. If you later inherit an IRA from Mom who had inherited it from Dad, this IRA comes from Mom, not Dad. It cannot be combined with those IRAs inherited directly from Dad. The main reason for this is that the RMDs on the inherited accounts will be calculated differently. RMDs on accounts that are inherited directly are generally based on the beneficiary’s age in the year after the account owner’s death.

If you keep those three IRAs inherited from Dad as three separate IRA accounts, you must calculate an RMD on each account. Those RMDs can then be added together and taken from any one or any combination of the three IRAs inherited from Dad. An RMD for an IRA inherited from Dad cannot be taken from an IRA inherited from any other person.

You can never combine inherited retirement accounts of different types. You cannot combine an inherited traditional IRA with an inherited Roth IRA. You cannot combine an inherited 403(b) with an inherited IRA – except when you are doing a direct transfer of the inherited plan funds out of the plan into a properly titled inherited IRA. In that case, you can move the inherited employer plan funds (401(k), 403(b), etc.) into an existing IRA inherited from the same person.

You also cannot take RMDs for one type of inherited account from another type of inherited account. The inherited 403(b) RMD cannot be satisfied with a distribution from an inherited IRA. Generally, RMDs from employer plans must be taken from each employer plan separately. There is an exception for 403(b) plans. They can be combined just as the inherited IRA distributions can be combined as described above.

It is all too easy to lose an inherited retirement account because of a simple mistake. Beneficiaries should consider consulting with an expert in this area in order to preserve their inheritance for as long as possible. You can find a listing of Ed Slott-trained advisors on our website, www.irahelp.com.