Can a Spouse Inherit an Already Inherited IRA (originally a 401K)? Help needed!

This is a complicated situation, but I'll try to break it down. When your father-in-law inherited the IRA from his daughter, he became what's called a "non-spouse beneficiary" and was subject to the 10-year rule or life expectancy rule depending on when your sister-in-law passed away. Now that your father-in-law has passed, his portion of the inherited IRA doesn't automatically transfer to your mother-in-law. An already-inherited IRA cannot be rolled over or transferred to just anyone - even a spouse. This is because the IRS considers an inherited IRA as already being "in distribution mode." Your mother-in-law should be listed as the successor beneficiary on your father-in-law's inherited IRA paperwork. If she is, she steps into his shoes and continues taking distributions on the same schedule he was on. She doesn't get a new distribution period. I'd recommend gathering all the inherited IRA paperwork and checking who was listed as the successor beneficiary. If it wasn't specified, you may need to consult with the IRA custodian about their default policies.

After dealing with a similar nightmare with my dad's accounts, I found taxr.ai (https://taxr.ai) incredibly helpful for figuring out inherited retirement accounts. I uploaded all the confusing documents from the financial institution, death certificates, and previous tax forms, and it analyzed everything and explained exactly what needed to happen next. It helped identify that the custodian had actually made a mistake in how they set up the inherited IRA originally, which could have caused serious tax issues down the road. The breakdown of required distributions by year was super helpful for planning purposes too. Definitely saved me from making some expensive mistakes during an already difficult time.

Just wanted to follow up - I ended up trying taxr.ai after all for help with my mother's complicated IRA beneficiary situation. Surprised at how helpful it actually was! Uploaded all the custodian statements and beneficiary paperwork, and got a clear explanation about successor beneficiary rules. Turns out my brother (who passed away last year) had named ME as the successor beneficiary on his portion of mom's IRA, which I had no idea about. The analysis showed exactly what distribution schedule I needed to follow and identified that the financial institution had been calculating required minimum distributions incorrectly. Would have overpaid taxes by thousands if I hadn't caught this! Really helped sort through the documentation nightmare.

If you're trying to get clear answers about this situation, good luck getting through to the IRS. I spent THREE WEEKS trying to get someone on the phone for clarification about inherited IRA rules after my aunt passed. Finally used Claimyr (https://claimyr.com) and got connected to an actual IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent was able to confirm exactly how the successor beneficiary rules work in your situation and what forms needed to be filed. Apparently there are specific coding requirements the IRA custodian needs to use when transferring an already-inherited IRA to a successor beneficiary. Getting this straight from the IRS saved us a lot of hassle with the financial institution who kept giving conflicting information.

I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I was still struggling with this exact inherited IRA situation and getting nowhere with the financial institution. Out of desperation, I tried the service, fully expecting to be disappointed. It actually connected me to a real IRS representative in about 20 minutes. The agent walked me through the specific requirements for successor beneficiaries of inherited IRAs and confirmed that my situation (very similar to the original poster's) required specific paperwork that the financial institution hadn't mentioned. The agent even gave me specific citation numbers from the tax code to reference when speaking with the financial institution. Saved me from making a very expensive distribution mistake. Sometimes being proven wrong is a good thing!

My sister went through something similar last year. The key thing to understand is that an already-inherited IRA has to stay in the original beneficiary's name with an additional "for benefit of" (FBO) designation for the successor beneficiary. So it would be something like "[Sister-in-law's name] IRA (deceased) FBO [Father-in-law's name] (deceased) FBO [Mother-in-law's name]." This gets super confusing for the custodians because they don't deal with it often. Make sure they don't mistakenly try to do a 60-day rollover (which isn't allowed for inherited IRAs) or reset the distribution schedule. Your mother-in-law has to continue on the same distribution schedule that was established when your father-in-law inherited it.

One important thing no one's mentioned - if your sister-in-law passed away BEFORE the SECURE Act implementation date (December 31, 2019), different rules might apply. The SECURE Act changed how inherited IRAs work pretty dramatically, but some inheritances were grandfathered under the old rules. Has anyone confirmed which distribution rules your father-in-law was following? Was he taking required minimum distributions based on his life expectancy, or was he subject to the 10-year rule?