Life and Death Planning for Retirement Benefits

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Chapter 4: Inherited Benefits: Advising Executors and Beneficiaries 189
the beneficiary’s taxable account) by mistake, there is no remedy, because a nonspouse
beneficiary cannot roll over a distribution—even if the distribution was made in error. See
“A” above.
If funds from an inherited IRA that are supposed to be transferred directly into another
inherited IRA (in the names of the same deceased participant and beneficiary) are instead moved
into the beneficiary’s own IRA, the transfer would not conform with the requirement recited in the
PLRs “decided” under Rev. Rul. 78-406 (see “B” above). Such an erroneous transfer would
presumably be treated as a taxable distribution to the beneficiary from the inherited IRA followed
by a regular (probably excess; see contribution to the beneficiary’s own IRA. See
E).
4.2.03 Combining inherited IRAs
For income tax purposes, IRAs inherited from one decedent are aggregated with (and only
with) other IRAs of the same type (traditional or Roth) inherited from that same decedent; see
For minimum distribution purposes, the minimum distribution is computed separately for
each IRA, inherited or otherwise. Having computed the RMD separately for each account,
however, an individual is entitled to take the RMD for all of certain “aggregate-able” IRAs from
any one or more of the IRAs in that group. As with income taxes, the individual’s own IRAs may
be aggregated only with each other for this purpose, and IRAs inherited from a particular decedent
may be aggregated only with other IRAs inherited from that same decedent. Reg. A-9.
Based on these income tax and minimum distribution rules, it would appear that a
beneficiary should be able to merge any traditional (or Roth) IRA inherited from a particular
decedent with any other traditional (or Roth) IRA inherited from that same decedent, for
convenience of management. However, there is no authority or guidance on this. See E).
4.2.04 Nonspouse beneficiary rollovers from nonIRA plans
A nonspouse “Designated Beneficiary” (see “C”) can have funds transferred, by direct
rollover (see “D”), from certain types of inherited nonIRA plans (see “B”) into an “inherited IRA”
(see “E”) or inherited Roth IRA (see . A surviving spouse as beneficiary has more
expansive options; se
Thi deals only with money that was still in the plan at the time of the participant’s
death. For money that was distributed prior to the participant’s death, see instead. If not
certain when the distribution occurred, see
A. Legislative background. Prior to the Pension Protection Act of 2006 (PPA ’06), the Code
permitted no one other than the participant and his surviving spouse to “roll over” money
from one retirement plan to another. PPA ’06 for the first time allowed a limited type of
rollover by a Designated Beneficiary other than the surviving spouse. After 2006, a
Designated Beneficiary is permitted to transfer certain inherited nonIRA plan benefits, by
direct rollover only, into an “inherited” IRA.
The main benefit of this type of transfer is that it allows a Designated Beneficiary to take
advantage of a deferred “stretch” payout of the benefits over his life expectancy, even if the plan
he actually inherited permitted only a lump sum distribution form of benefit. Se In Notice