Separate subaccounts

[k man]

Beneficiary died and left the account to 3 individual beneficiaries. They did not separate the accounts by December 31 of the year of her death. However, they want to give one beneficiary all his money now. Do you know if its permissible to divide the account into separate subaccounts so that the one can be paid out but the other two can roll the accounts or deal with their interests according to their own desires. I think they can do it but they just have to use the oldest life expectancy. the final regulations dont allow for this but there are some letter rulings and such.

[Bird]

I think you're right; they can segregate the accounts now and each beneficiary can do what they want, but life expectancies will forever be based on the oldest beneficiary.

[Guest Sieve]

Segregation into separate accounts can occur until 12/31 of the year FOLLOWING the year of death (not the year OF death). (Treas. Reg. Section 1.401(a)(9)-8, Q&A-2(a)(2).) You may still have time to establish separate accounts and use a different measuring life for each account.