On July 31, 2026, the IRS issued PLR 202631001, which addressed a situation where a decedent owned a traditional IRA and Roth IRA, but did not designate a beneficiary for either IRA. Upon the passing of the decedent, the estate became the beneficiary. Two beneficiaries were designated under decedent’s will to receive equal shares of the traditional IRA and the Roth IRA.

To implement the terms of the will, the executor of the estate divided and titled the assets of the traditional IRA and the Roth IRA into two separate inherited IRAs by means of trustee-to-trustee transfers. Because each beneficiary’s interest in the traditional IRA and Roth IRA was transferred via a trustee-to-trustee transfer, the transfers should not constitute taxable distributions under §408(d)(1) and should not constitute rollovers under §408(d)(3). (Rev. Rul. 78-406 provides that a direct IRA trustee-to-trustee transfer is not a taxable payment or distribution and is not a rollover under §408(d)(3), because the funds are not within the participant’s direct control or use.) The estate should not include income, and the custodian should not report income to the estate, solely as a result of the trustee-to-trustee transfers. Later distributions from the inherited IRAs to the beneficiaries remain subject to the applicable inherited IRA distribution and income tax rules.

This ruling provides some IRS insight for estates that become the beneficiary of retirement accounts where no beneficiary designation has been made. It illustrates the IRS’s willingness to permit administrative division of estate-owned inherited IRAs through trustee-to-trustee transfers while preserving the inherited IRA status and deferring taxation until distributions are made to the beneficiaries.

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