Related information can be found in IRS publication 590. See page 32 (bottom right hand corner) and page 35.
If the trust is qualified, as described on page 35, distributions may occur over the life expectancy of the oldest beneficiary under the trust.

If the trust is not qualified, then the following applies:

  1. If the IRA owner dies before the required beginning date, the assets must be distributed by December 31 of the fifth year following the year the IRA owner died.
  2. If the IRA owner dies on or after the required beginning date, the assets must be distributed over the remaining life expectancy of the decedent.

The assets can't be rolled to a retirement account, but they can be transferred to an inherited IRA. When speaking with the financial institution, be sure to use the right terminology, as use of the wrong terminology could result in transactions that you do not want. When moving the assets to an inherited IRA, please check to make sure that any document you sign is not a distribution request, but a transfer request. If you sign a distribution request and the assets are distributed from the IRA, the amount will not be eligible to be rolled to an IRA and will be treated as ordinary income.

Please discuss the matter with the financial institution and a competent tax professional to ensure that all the necessary steps are taken to ensure compliance, as well as to ensure that you make the most financially suitable choices.

For more information about inherited IRA assets, check out Inherited Retirement Plan Assets – Part 1, Inherited Retirement Plan Assets – Part 2, The Importance Of Sept. 30 For Multiple Beneficiaries.

This question was answered by Denise Appleby
(Contact Denise)

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