Estate may divide inherited IRAs through direct trustee transfers

Plain-English summary

A decedent died without naming beneficiaries for a traditional IRA and a Roth IRA, so the estate became the beneficiary of both accounts. The will left the accounts equally to two individual beneficiaries. The estate proposed dividing each IRA through direct trustee-to-trustee transfers into separately titled inherited IRAs for the beneficiaries. The IRS ruled that the transfers would not be taxable distributions and would not be rollovers under IRC § 408(d). It also ruled that later distributions from the new inherited IRAs to the beneficiaries would not be income to the estate, while leaving required minimum distribution issues unaddressed.

Ruling snapshot

• Question: Could the estate divide the decedent's IRAs into inherited IRAs for two beneficiaries without triggering taxable distributions?
• Outcome: Approved
• Key authorities: IRC §§ 72, 408(d); Rev. Rul. 78-406

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202631001 [Third Party Communication:
Release Date: 7/31/2026 Date of Communication: Month DD, YYYY]
Index Number: 408.00-00, 408.06-00
Person To Contact:
---------------------- --------------------, ID No. -----------------
--------------------------------- Telephone Number:
-------------------------------- --------------------
------------------------------- Refer Reply To:
------------------------------------- CC:EEE:EB:QP1
PLR-102620-26
Date:
May 06, 2026

Legend

Decedent = ----------------------------------------------------------------------
Taxpayer A = ---------------------------------------------------
Taxpayer B = ---------------------------------------------
Estate E = -----------------------------------------------------------
State S = ----------------
IRA X = ---------------------------------------------------------
IRA Y = ---------------------------------------------------------
Date 1 = ------------------
Date 2 = ------------------
Date 3 = --------------------

Dear ----------------:

This is in response to your letter dated January 6, 2026, and updated by
correspondence dated March 20, 2026, submitted on your behalf by your authorized
representative, in which you request rulings under § 408 of the Internal Revenue Code.

The following facts and representations have been submitted under penalties of perjury
in support of the rulings requested.

Decedent maintained two individual retirement accounts (IRAs) – a traditional IRA (IRA
X) and a Roth IRA (IRA Y). Decedent did not designate a beneficiary under either IRA.
Decedent’s estate (Estate E) accordingly became the beneficiary of IRA X and IRA Y
after Decedent’s death on Date 2. After Decedent’s death, IRA X and IRA Y were each
retitled as IRA of Decedent f/b/o Estate E.

Decedent’s Last Will and Testament, executed on Date 1, provides that IRA X and IRA
Y pass to Taxpayer A and Taxpayer B (Beneficiaries), each in equal shares. On Date 3,
a State S court appointed Taxpayer A as administrator of Estate E.
PLR-102620-26 2

Taxpayer A, as administrator of Estate E, proposes, consistent with Decedent’s Last
Will and Testament, to equally divide the assets of IRA X and IRA Y each into two
separate IRAs by means of trustee-to-trustee transfers. Each transferee IRA will be
titled “Decedent (Deceased) IRA f/b/o Beneficiary as beneficiary of Estate E.”

Based on the foregoing facts and representations, you have requested the following
rulings:

1. The transfer of each Beneficiary’s respective one-half interest in IRA X and IRA Y to
   separate transferee IRAs (via trustee-to-trustee transfer) will not constitute a taxable
   distribution under § 408(d)(1) to the Beneficiaries and will not constitute a rollover as
   defined in § 408(d)(3); and

2. After the transfer of assets from IRA X and IRA Y to the transferee IRAs, Estate E will
   not include in its gross income, and the custodian of the transferee IRAs will not report
   as income to Estate E, any amounts distributed from the transferee IRAs to the
   Beneficiaries.
   Law

Section 408(d)(1) provides that, except as otherwise provided in § 408(d), any amount
paid or distributed out of an IRA shall be included in gross income by the payee or
distributee, as the case may be, in the manner provided under § 72.

Section 408(d)(3)(A) provides that § 408(d)(1) does not apply to any amount paid or
distributed out of an IRA to the individual for whose benefit the IRA is maintained if: (i)
the entire amount received (including money and any other property) is paid into an IRA
for the benefit of such individual not later than the 60th day after the day on which the
individual receives the payment or distribution, or (ii) the entire amount received
(including money and any other property) is paid into an eligible retirement plan (other
than an IRA) for the benefit of such individual not later than the 60th day after the date
on which the payment or distribution is received, except that the maximum amount
which may be paid into such plan may not exceed the portion of the amount received
which is includible in gross income (determined without regard to § 408(d)(3)).

Section 408(d)(3)(C) provides that amounts received from an inherited IRA cannot be
rolled over into another IRA. For purposes of section 408(d)(3), an inherited IRA is an
IRA maintained by an individual who acquired the IRA by reason of the death of another
individual if the acquiring individual is not the surviving spouse of the other individual.

Revenue Ruling 78-406, 1978-2 C.B. 157, provides that the direct transfer of funds from
one IRA trustee to another IRA trustee, even if at the behest of the IRA holder, does not
constitute a payment or distribution to a participant, payee or distribute, as those terms
are used in § 408(d). Furthermore, such a transfer does not constitute a rollover
distribution. Revenue Ruling 78-406 specifically applies in the case of a transfer by the
PLR-102620-26 3

original IRA owner from one IRA titled in the IRA owner’s name to another IRA titled in
the same manner.

The rules discussed above will apply to your ruling requests as follows:

1. Consistent with the principles of Rev. Rul. 78-406, because each of the transferee
   IRAs will be set up and maintained in the name of Decedent (Deceased) f/b/o
   Beneficiary as beneficiary of Estate E, the transfer of each Beneficiary’s respective one-
   half interest in IRA X and IRA Y to separate transferee IRAs (via trustee-to-trustee
   transfer) will not constitute taxable distributions under § 408(d)(1) to the Beneficiaries
   and will not constitute rollovers as defined in § 408(d)(3); and

2. After the transfer of assets from IRA X and IRA Y to the transferee IRAs, Estate E will
   not include in its gross income, and the custodian of the transferee IRAs will not report
   as income to Estate E, any amounts distributed from the transferee IRAs to the
   Beneficiaries.

This letter assumes that IRA X and IRA Y satisfy the requirements of § 408 at all
relevant times. It also assumes that the transferee IRAs to be established by the
Beneficiaries will also satisfy the requirements of § 408 at all relevant times.

The rulings contained in this letter are based upon information and representations
submitted by Taxpayer A and accompanied by a penalty of perjury statement executed
by Taxpayer A, as specified in Rev. Proc. 2026-1, 2026-1 I.R.B. 1, § 7.01(16)(b). While
this office has not verified any of the material submitted in support of the request for
rulings, it is subject to verification on examination. The Associate office will revoke or
modify a letter ruling and apply the revocation retroactively if there has been a
misstatement or omission of controlling facts, the facts at the time of the transaction are
materially different from the controlling facts on which the ruling was based, or, in the
case of a transaction involving a continuing action or series of actions, the controlling
facts materially change during the course of the transaction. See Rev. Proc. 2026-1,
§ 11.05.

Except as expressly provided above, no opinion is expressed or implied concerning the
federal income tax consequences of any other aspects of any transaction or item of
income described in this letter ruling including, but not limited to, the rules with respect
to the required minimum distributions that apply to the IRAs.

This letter is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.
PLR-102620-26 4

                                      Sincerely,

                                      /s/ Neil S. Sandhu

                                      Neil S. Sandhu
                                      Senior Technician Reviewer
                                      Qualified Plans Branch 1
                                      Office of the Associate Chief Counsel
                                      (Employee Benefits, Exempt Organizations, and
                                      Employment Taxes)

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