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Personal Investment & Financial Planning Q`s/Estate Settlement: Transferring Inherited IRA Assets


QUESTION: Hello Bruce Julien,

My question pertains to inherited IRAs and how the assets can be appropriately conveyed under the circumstances.

My dad passed away a year ago. He left no will, and pursuant to New Jersey law, my mother and I, his son, are the beneficiaries of his estate. Among his assets, he had one IRA. No beneficiary was named on this IRA, therefore, the beneficiary is his estate.

My dad was the sole beneficiary of his dad's estate. Among the assets in that estate, there was also one IRA, which named my dad as the beneficiary.

The assets in each IRA are presently comprised of illiquid securities. The investment firm charges a small annual administration fee per account.

My mother, who is the administrator of my dad's estate, has expressed interest in combining these two IRAs, and moreover, transferring the combined assets into a regular non-IRA account jointly held.

Given the size of my dad's estate and the classes of beneficiaries, no federal or state taxes were owed.

Personally, I am fine with her desires to do this, as consolidating several accounts and distributing the estate assets would bring a satisfactory resolution to my dad's estate.

Please advise me if what she is contemplating is appropriate and whether you are aware of any legal and/or tax issues that could be encountered by doing this. Thank you.


I believe the grandfather IRA must pay out in cash now. That would be fully taxable

Your father's IRA may be put in a beneficiary IRA in your name and moms name and must pay out over your respective life expectancies. The IRA custodian will likely prompt you for paperwork. Alternatively for the father's IRA, you may cash it out all at once (and put it with the cashed out grandfather IRA above) but there might be more severe tax consequences since it is a larger payout.

You live in NJ so let me guess - Apple REITs? If so or something like that, you also have the hurdle of getting these illiquid securities sold and put into cash. They likely will retitle them to become beneficiary IRAs or individual accounts easily, but the cashing out part might be hard. Ask if there is a special liquidity provision for death.

This is a basic forum and I've gone in a little deep but I still might have missed something. Dad needed a will and basic beneficiary advice while he was alive and now it is on you to mop it up. You should see an estate attorney or fee financial planner to secure the plans above. In any event your father was not served by the brokerage firm he was at; they should have prompted him firmly to put beneficiaries on the IRA's while he was alive.

Good luck


---------- FOLLOW-UP ----------


Thank you for your comprehensive reply. Sorry I took so long getting back to you, but this has been a hectic year and the business continues.

I just have a few other questions:

When you reference cashing the IRAs out all at once, am I correct that you are referring to a lump sum distribution? Would there be any penalties incurred by taking this option, other than additional reportable income?

Also, because my dad's estate is the beneficiary, would my mother, as estate administrator, be allowed, if she so chose to distribute my dad's personal IRA to myself, to retitle my dad's now-estate IRA "Jack Smith IRA (deceased Jan. 8, 2013) for the benefit of Jim Smith, beneficiary."? Or is that option now not permissible because of the original failure to name a specific beneficiary?  

You are right that these are Apple REITs. Apple, the underwriter, presently disallows any liquidity due to a recently completed merger of APP 7, 8, and 9, the merger resulting in the Apple Hospitality REIT. Despite the merger completion, liquidity is still prohibited under any circumstance. Because both IRAs are heavily invested in these REITs, they will have to be transferred to a DLA account in-kind.

You are likewise correct that the brokerage - DLA - should have advised him to name a beneficiary. I suspect that they were more interested in selling the securities at that point and my dad didn't press it, and so the issue of beneficiaries went undecided. Accordingly, and I guess pursuant to DLA's rules, my dad's estate is now the beneficiary.

I very much appreciate and thank you for your deeper response as it has helped me and my mom to better understand about this part of the estate settlement.

I do mean lump sum. Ask DL if there are other penalties. I suspect not. Do be aware if you or your mother have threshholds for income on certain tax forms or programs etc this might bump you over (?)

YOU can not put the IRA in your name. It might be able to be called a beneficiary IRA where you withdraw over time. I am not certain if your mother can do that either though; ask the attorney settling the estate. Or for the both of you, try to see if DL will allow bene IRA's. If they will, there is your answer. Then you can transfer away from them

I do want to caution you to get help on this directly, an attorney or planner. I am happy to help through this forum but I am just a guy on the internet, not your advisor who you can lean heavily on and be sure every known or unknown is clear.

Good luck

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Bruce Julien


I can answer questions on and raise issues clients overlook in the areas of Estate Planning as far as taxes and distribution flow problems, Asset Management as far as appropriateness of assets and allocations for a desired goal and the value a consumer gets for their costs, Tax Planning related to Income and Estates, and Insurance/Annuity questions particularly in light of suitability to the consumer.


I became a CPA in 1991 and began offering financial advice in 1992. I am a Registered Investment Advisor which means I sign off on putting clients' interests first in a fiduciary role.

BA in Accounting, University of Maryland 1990

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