Inheriting an Inherited IRA

[DMFA]

Grandfather died last year, mom inherits his TIRA.  No problem, clear as mud, she's on his RMD schedule.

My mother died this year, I inherit her inherited TIRA and her TIRA.  She was under 70 1/2, so I won't have RMDs until 5 years after her death (starting 2023) based on the 5-year rule.

My question is - and is my suspicion is yes, based on non-spouse rules in IRS Pub 590-B - is do I need to create two inherited TIRA accounts, one from my grandfather's and one from my mother's, since they'd be on different RMD schedules?  Or would I be inheriting the whole chunk as one inherited TIRA?

Thanks.

[jfoxcpacfp]

You need to keep them separate.

My sympathy on the loss of your mother.

[chansen]

My sympathies. That's a tough couple of years.

I agree, you need to keep the accounts separate.

I think you are misinterpreting the 5 year rule. If you want to take distributions over your live expectancy, you must start distributions by 12/31 of the year following the death. 12/31/2018 for your Mom's IRA. If you miss that deadline you have until 12/31 of the fifth (12/31/2022) year to distribute the ENTIRE IRA.

[DMFA]

chansen wrote:

My sympathies. That’s a tough couple of years.

I agree, you need to keep the accounts separate.

I think you are misinterpreting the 5 year rule. If you want to take distributions over your live expectancy, you must start distributions by 12/31 of the year following the death. 12/31/2018 for your Mom’s IRA. If you miss that deadline you have until 12/31 of the fifth (12/31/2022) year to distribute the ENTIRE IRA.

Click to expand...

Thanks for that clarification.  I'm not planning on distributing it any more than I need to.

However, I can't simply roll my distribution into a Roth like I could with my own accounts, at least not without getting the 6% excess penalty, right?

[chansen]

I believe only a spouse can convert an inherited IRA to a Roth IRA.

[jfoxcpacfp]

DMFA wrote:

chansen wrote:

My sympathies. That’s a tough couple of years.

I agree, you need to keep the accounts separate.

I think you are misinterpreting the 5 year rule. If you want to take distributions over your live expectancy, you must start distributions by 12/31 of the year following the death. 12/31/2018 for your Mom’s IRA. If you miss that deadline you have until 12/31 of the fifth (12/31/2022) year to distribute the ENTIRE IRA.

Click to expand…

Thanks for that clarification.  I’m not planning on distributing it any more than I need to.

However, I can’t simply roll my distribution into a Roth like I could with my own accounts, at least not without getting the 6% excess penalty, right?

Click to expand...

1. You cannot convert an inherited IRA into a Roth IRA. An IRA inherited from a spouse can be converted as @chansen told you.


2. You can either cash out your mom's IRA over 5 years or stretch it out over your own life expectancy. You  must establish a separate inherited IRA account in your mom's name "FBO" your name and take your first RMD by 12/31/18 to do the stretch.


3. I'm honestly not sure about the inherited IRA that passed from your grandfather through your mom. How was it titled?  See following clarification.

[jfoxcpacfp]

Response to the inherited inherited IRA - you must compete the distribution according to the pattern chosen by your mother. If your mom used life expectancy RMDs, you must continue the same schedule by using the divisor that applied to your mom for 2017 and continue to reduce that divisor by 1.0 for each year thereafter. The inherited IRA should be titled showing only the your name as beneficiary and your mother's name as decedent. Your grandfather's name will no longer be included on the account.

If your mom elected the 5 year rule, you continue with it and must drain the account by the end of the 5 year period starting with the year she began taking distributions.

[DMFA]

jfoxcpacfp wrote:

DMFA wrote:

chansen wrote:

My sympathies. That’s a tough couple of years.

I agree, you need to keep the accounts separate.

I think you are misinterpreting the 5 year rule. If you want to take distributions over your live expectancy, you must start distributions by 12/31 of the year following the death. 12/31/2018 for your Mom’s IRA. If you miss that deadline you have until 12/31 of the fifth (12/31/2022) year to distribute the ENTIRE IRA.

Click to expand…

Thanks for that clarification.  I’m not planning on distributing it any more than I need to.

However, I can’t simply roll my distribution into a Roth like I could with my own accounts, at least not without getting the 6% excess penalty, right?

Click to expand…

1. You cannot convert an inherited IRA into a Roth IRA. An IRA inherited from a spouse can be converted as @chansen told you.


2. You can either cash out your mom’s IRA over 5 years or stretch it out over your own life expectancy. You  must establish a separate inherited IRA account in your mom’s name “FBO” your name and take your first RMD by 12/31/18 to do the stretch.


3. I’m honestly not sure about the inherited IRA that passed from your grandfather through your mom. How was it titled?

Click to expand...

1. I figured that.  Fortunately Pub 590-B was fairly clear about that (for once).

2. Yeah, that was a bit ambiguous, thanks for clearing that up.

3. My grandfather's IRA was his TIRA which was my mother's Inherited TIRA (Grandfather FBO Mom), which the Fidelity people tell me becomes my Inherited IRA (Grandfather FBO me) with my grandfather's vitals.

Let me make sure I understand RMDs, while I'm at it.  My brother will be 35 in 2018, life expectancy 48.5 from then, and denominator decreases by 1 each year, so it's 1/48.5 = 2.06% in 2018, then 1/47.5 = 2.11% in 2019, 1/46.5 = 2.15% in 2020, and on down the line?

[jfoxcpacfp]

RMDs: You are calculating correctly.

Not sure Fidelity gave you correct information but it may be up to the custodian as to whether you drop your grandfather's name from the title or not. I know you can but not whether it is mandatory.

[adventure]

My condolences.

... I read this and thought, man, why can’t one just spend it already!! I thought of how many people can’t find $400 to fix the car this month, and then others have to go through this hassle. ... it’s be nice to have a cash it out for free if it’s >1 generation. Something.