Problems often begin after the IRA owner dies, as these readers can attest.
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Question: Father died in 2008 leaving his IRA to son, who is age 50. Son began taking a life expectancy payout from the inherited IRA. Now mother has died in 2012, and she also left her IRA to son. Since both accounts have the same beneficiary, and son is going to take a life expectancy payout from both accounts, can he combine them? It would be much easier for him to have only one inherited IRA and take only one annual minimum distribution than juggle two inherited IRAs and make two annual minimum distribution calculations.
Answer: Unfortunately, he can't do it. The IRS has decreed that, for minimum distribution and income tax purposes, an IRA inherited from one individual cannot be combined with an IRA inherited from a different individual--even if it's the same beneficiary who now owns both accounts.
Though this answer seems illogical, remember that even though the same beneficiary inherited both accounts, his Applicable Distribution Period (life expectancy) is actually different for the two accounts. Once you inherit an IRA, your life expectancy for that inherited account becomes "carved in stone": It is determined based on your age in the year after the year of the participant's death, then it decreases by one full year each year. Meanwhile, however, your "real" life expectancy does not go down by one each year. Your real life expectancy keeps extending outward the longer you live--until you inherit another account, at which time your life expectancy, as a beneficiary, becomes frozen for the new account.
Son, the beneficiary, was born in 1950. Father died in 2008, so Son's first Distribution Year for the IRA inherited from Father was 2009, the year Son turned age 59. According to the IRS' Single Life Expectancy Table, Son's life expectancy for Father's IRA was 26.1 years in 2009, 25.1 in 2010, 24.1 in 2011, and 23.1 in 2012. Son's "divisor" (life expectancy or Applicable Distribution Period) for Father's IRA for the year 2013 will be 22.1.
Mother died in 2012. Son's first distribution year for Mother's IRA will be 2013, the year Son turns age 63, so Son's life expectancy (Applicable Distribution Period or divisor) for that account in 2013 will be 22.7, not 22.1!
(By the way, this business of a fixed or frozen life expectancy does not apply to the surviving spouse. A spouse who inherits benefits from her deceased spouse has two options that are not available to other beneficiaries. She can take a life expectancy payout with her life expectancy being recalculated (extended) every year, or she can roll the whole thing over to her own IRA and stop taking distributions as beneficiary altogether.)
If you don't like my answer, you can apply for an IRS ruling that it would be all right to combine the two accounts as long as Son uses the shorter Applicable Distribution Period for both accounts. The IRS has never commented on that specific approach. But I assume that applying for an IRS ruling (with attendant delay and expense) would be even more inconvenient than maintaining two separate IRAs with different distribution periods for the next 22 years, especially since there's no way to predict whether the IRS will go along with you.