Combining Inherited IRA's

[bdeancpa]

When a beneficiary inherits several IRA's from the same individual (a parent who died at 77 years of age), is there any prohibition against combining all the IRA's into one? Since remaining distributions can come out over the beneficiaries life expectancy all the IRA's should be using the same factor to calcualte the minimum distribution. Thus, the distribuion amount should be the same whether they are combined or not.

Also, does the rule that agreggates IRA's for calculating the minimum distribution amount, but lets you take the calculated distribution from one or any combination of the IRA's, apply to inherited IRA's the same as it applies to an original account owner over 70 1/2. Thus, if 12 IRA's were inhereted, and they were with different custodians, could the required minimum distribution be calculated, based upon the beneficiaries life expectancy, and then the distribution come from any of the IRA's?

Thanks in advance for any guidance.

[mbozek]

Only reason to keep separate IRAs is if you want to designate separate beneficaries for each IRA.

[Guest reg_h2b]

I don't know of any explicit guidance in the reg's about aggregating inherited trad. IRA's. But if you check Pub. 590 they do say it's OK with inherited Roth IRAs (assuming LE is same for all RIRA's).

I don't see why it wouldn't be OK with inherited trad. IRA's. In the past, I've talked to at least 6 major custodians about their practices on this issue: they all allow aggregation. Hopefully the IRS will be explicit in the Final MRD reg's (due any day now....)

As to your other question: Yes, you can take your aggregated IRA MRD out of just one inherited IRA.

Reg

[Appleby]

Under the new proposed RMD rules (Section 1.401(a)(9)-8 Special rules) Question and Answer 9, amounts in IRAs that an individual holds as a beneficiary of the same decedent may be aggregated, but such amounts may not be aggregated with amounts held in IRAs that the individual holds as the IRA owner or as the beneficiary of another decedent.

[John G]

Reasons to combine:

1. Possibly reduce or eliminate annual IRA fees.

2. Easier to track on monthly statement

3. Investment decisions may be made with one internet location or phone call rather than multiple calls.

4. Easier to reallocate blocks and make trades from one asset total.

5. Dividends more easily swept to one location for eventual reallocation rather than being piece meal.

Reasons besides above for not moving:

1. Mutual funds not easily transfered - brokerages do not list or have access to all mutual funds.

2. Some CDs should only be moved at maturity.

Hope this helps. Investment choices are ussually more important issue than the custodian number. No reason to rush the decision.

[Guest reg_h2b]

Appleby-

New regs Section 1.401(a)(9)-8 Special rules Question and Answer 9? My new regs show that reg is about pension plan MRD before retirement.

Could you double check that reg.

Reg

[Appleby]

Good catch- its actually 1.408-8 Q&A 9b ( of the new proposed RMD reg)

Please see URL http://www.brentmark.com/newrmd.htm

[Guest reg_h2b]

Appleby-

Thanks. When I originally read this I took their use of the word "aggregated" to mean the aggregating of the separate IRA MRDs. But I agree, "Amounts in IRAs that an individual holds as a beneficiary of the same decedent may be aggregated..." seems to imply aggregating all the entire IRA accounts. But in the context of the question, which is talking about MRDs (ie "Under this rule..") I'm not 100% sure. I quess one could then come back and say "why couldn't you aggregate everything in this case if you can aggregate the MRDs"? I agree; I know of nothing that prohibts one from aggregating everything. I just think the reg. could be clearer. Final Regs? We're waiting Ms. Vohs! (Update: apparently there was a blurb in the WSJ that Final Regs are due out by the end of this week).

Reg:1.408-8:

Q-9. Is the required minimum distribution from one IRA of an owner permitted to distributed from another IRA in order to satisfy section 401(a)(9).

A-9. Yes. The required minimum distribution must be calculated separately for each IRA. However, such amounts may then be totaled and the total distribution taken from any one or more of the individual IRAs. However, under this rule, only amounts in IRAs that an individual holds as the IRA owner may be aggregated. Amounts in IRAs that an individual holds as a beneficiary of the same decedent may be aggregated, but such amounts may not be aggregated with amounts held in IRAs that the individual holds as the IRA owner or as the beneficiary of another decedent. Distributions from section 403(B) contracts or accounts will not satisfy the distribution requirements from IRAs, nor will distributions from IRAs satisfy the distribution requirements from section 403(B) contracts or accounts. Distributions from Roth IRAs (defined in section 408A) will not satisfy the distribution requirements applicable to IRAs or section 403(B) accounts or contracts and distributions from IRAs or section 403(B) contracts or accounts will not satisfy the distribution requirements from Roth IRAs.