Non-Spouse IRA Rollover after death

Traditional IRAs have always allowed non-spouse beneficiaries to rollover IRAs as a DESIGNATED BENEFICIARY ACCOUNT (DBA).  Each of your three beneficiaries have until December 31 of the year following the date of death to 1) make an election to take all of the money and be taxed on the full amount of the IRA with no adjustment for basis (unless there are non deductible contributions a traditional IRA will have zero basis); 2) spread the distribution over 5 years and be taxed OR 3) to rollover the inherited IRA to a designated beneficiary account and be subject to required minimum distributions over the beneficiaries individual life time.

It is important that the new account be title as follows The "Deceased Person" IRA for the benefit of "Beneficiary".  For example, if Ned Jones died and left his traditional IRA to me the title of the new account would read "Wells Fargo Bank IRA C/F Max K. McNeal as beneficiary of Ned Jones IRA" or alternatively the "Ned Jones IRA F/B/O Max K. McNeal".  This is known as a beneficiary IRA or sometimes an inherited IRA.  Failure to properly title the new account will result in immediate taxation to the beneficiary.  To my knowledge the IRS has never allowed anyone to redo a botched account title.

About the Author

Reed Tinsley CPA

This article is written by Reed Tinsley, a Houston, TX-based CPA with over 30 years of experience advising physicians and medical practices across Texas and the United States. Reed holds certifications as a Certified Valuation Analyst (CVA), Certified Healthcare Business Consultant (CHBC), and Certified Financial Planner (CFP), specializing exclusively in the healthcare sector. He is a published author, nationally recognized speaker, and trusted advisor to physicians on accounting & tax, practice management, and financial planning. Schedule a Free Consultation.