Court’s Change to Beneficiary Didn’t Create Inherited IRA

Posted by Kim Chen on February 24th, 2017

During his lifetime, the decedent designated a trust as his IRA’s beneficiary. However, the IRA’s custodian didn’t have a copy of the trust instrument and found no evidence that a trust had been created. According to his will, the decedent’s entire estate was left to his spouse, who wanted to roll over the account to her own IRA. To accomplish this, the spouse sought court approval to change the beneficiary designation from the trust to herself. In a Private Letter Ruling, the IRS concluded that the IRA was not an inherited IRA for purposes of IRC Sec. 408(d)(3) and that a rollover was permitted despite the courtÆs change to the beneficiary designation. In addition, the IRS held that the IRA was subject to the five-year required minimum distributions rule. Ltr. Rul. 201706004 .

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