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Can Beneficiary Transfer IRA CDs?

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A benficiary inherited (mother to daughter)several IRA CDs and is currently receiving the minimum distribution which is paid from the lowest interest CD. Two of the CDs are maturing in April, 2003 and the beneficiary wants to transfer them to another bank where she has a substantial IRA comprised of CDs. Are there IRS or ABA rules/regs covering this situation? Can the daughter/beneficiary transfer the CDs without having to incur a tax liability above the minimum distribution she elected?

First, an inherited IRA cannot be combined with an IRA which the daughter has established with her own contributions.

Second, the sending institution must make the required minimum distribution for the calendar year, it cannot transfer that amount to the successor fiduciary.

Third, several years ago the IRS issued a private letter ruling saying that an inherited IRA could be transferred to another custodian, if the sending institution received an acknowledgement from the receiving institution that the IRA was inherited. The point being that the account would be properly titled, the appropriate distribution calculations would be made and the funds would not be commingled with IRA's in the beneficiary's name alone.

A private letter ruling is a fragile source of legal authority and I would suggest that any advice that this is O.K. come from someone other than you. Remember, the funds are being transferred to another bank. Let them take the responsibility for giving the advice that says its not a problem.

First published on 05/12/03

First published on 05/12/2003

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