Multiple Inherited IRAs: Any Need for Segragation?

[Guest reg_h2b]

Son is the bene of multiple IRA's of his deceased father.

Son wants to consolidate inherited IRA's under one custodian (by means of custodian to custodian direct transfer).

Can son also consolidate ALL the inherited IRA's (from father) to ONE aggregate inherited IRA?

I don't see why not. All IRA's from father; all MRD taken with same LE. But I'm uncomfortable with aggregating different inherited IRA's. Obviously safe harbor is just to keep them separate IRAs (custodian was unsure). I know that a bene can not contribute to an inherited IRA but if one is only combining inherited IRAs that is not a contribtion (I think).

Has anyone done this? If accounts need to be kept separate what did you title the different inherited IRA's?

Reg Jones

[Appleby]

According to the RMD regulations, inherited IRAs must be maintained separately, i.e. they should not be combined.

[Guest reg_h2b]

Appleby et al-

Do you have a MRD reg. site?

If they must be separate is there any naming convention?

Ex:

"John Smith decedent IRA, FBO John Smith Jr, Inherited IRA 1"

"John Smith decedent IRA, FBO John Smith Jr, Inherited IRA 2"

"John Smith decedent IRA, FBO John Smith Jr, Inherited IRA 3"

Other Suggestions?

[Mary Kay Foss]

I'm not so sure that IRAs inherited from the same person cannot be combined, although I can't find a definitive source. Sec 408(d)© denies rollover treatment for an inherited IRA. Private letter rulings have allowed transfers from the decedent's custodian to a custodian named by the beneficiary but the rulings generally deal with one specific IRA.

The 2001 proposed regs. at 1.408-8, Q&A 9 say that amounts in IRAs that an individual holds as a beneficiary of the same decedent can be aggregated for RMD purposes. This doesn't go a step further and endorse combining them but it doesn't prohibit it either.

Your suggested titling is in line with what my clients have used.

[Guest reg_h2b]

Obvious Next Question...

Has anyone out there actually combined inherited IRAs into one

inherited IRA?

I just talked to a Retirement Specialist at Fidelity. Here's what I learned:

1. They have and do combine multiple inherited IRAs into one inherited IRA like I described above. They deem it to be a direct transfer and thus not a IRS reportable event.

2. Fidelity only started receiving via direct transfer inherited IRA's in 2001 with the release of the new prop regs. Prior to that they were not comfortable with the lack of reg framework on this issue (assume back then you needed a PLR to transfer to Fidelity).

Is there any problem with combining FBO IRA's into one FBO IRA?

What if the expected LE on FBO IRA "A" was different than FBO IRA "B" (say they had mutiple bene's on IRA "A"). Would you then lose the ability to use the larger LE if you combined? I'd say yes, in that case stick to separate accounts.

Reg

[Appleby]

Generally, we do not combine inherited IRAs for the reason reg_h2b provided, i.e. how does one determine the life expectancy to be used for each inherited IRA?

[Guest reg_h2b]

Right but where LE is the same for both "FBO" IRA's you can apparantly do it and it seems to make sense.

See page 45 "Aggregation of Roth IRA's" Pub. 590 for a short discussion of this. I haven't checked for a reg. framework yet.

Reg