When you inherit an IRA from someone other than your spouse, you are able to take advantage of certain protections or deferrals of tax inherent in the IRA, but you are somewhat restricted in your actions with the account. These non-spouse rollover rules also apply to a spouse who has elected NOT to treat the inherited IRA as his own IRA.

Other than the trustee-to-trustee transfer, an inherited IRA is not permitted to be rolled over – in other words, a non-spouse rollover (the 60-day variety) is not allowed.

Restrictions

First of all, you are not allowed to treat the IRA as your own – in other words, the account can only be re-titled as an inherited IRA. This means that you can move the account to another custodian (via trustee-to-trustee transfer only) or leave it at the same custodian, and change the title to read as “John Doe IRA (Deceased January 1, 2009) FBO Janie Brown” or something very similar.

In addition to the restriction on titling, the IRA beneficiary must begin taking Required Minimum Distributions (RMD) as described below:

If the owner of the account died on or after his Required Beginning Date, which is generally April 1 of the year following the year in which he reached age 70½, the RMD is based on the longer of: 1) the owner’s life expectancy¹; 2) the beneficiary’s life expectancy¹; 3) the oldest of multiple beneficiaries’ life expectancy¹ (if there are more than one beneficiary).

If the owner of the account died before his Required Beginning Date, the RMD is based upon the beneficiary’s life expectancy¹ or the life expectancy¹ of the oldest beneficiary if there are more than one beneficiary.

The Designated Beneficiary

The designated beneficiary is a specifically-named individual (or individuals, if more than one beneficiary is to inherit the account). The designated beneficiary is determined on September 30 of the year following the year of the death of the plan owner. In order to be named the designated beneficiary, an individual must be named on the plan documents as of the date of death (no changes can be made after death).

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