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A couple of questions from a newbie here.
I plan on contributing to a Roth IRA for the first time, can I add
to an inherited Roth IRA or do I have to start a new account?

Next question concerns assent allocation. I have an IRA and a Roth
IRA (both inherited) that are currently in mutual funds. My wife
and I will be opening our own Roths this year and also an after tax
account, so that is five accounts. I want to get out of the mutual funds
and invest in 10 or so Rule Maker companies. Does it matter how I
divide the stocks among the different accounts? Should each account
have some diversification among the 10 stocks? My investing horizon
is very long term.

Thanks

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Greetings, Dougiedo, and welcome. You wrote:

<<A couple of questions from a newbie here.
I plan on contributing to a Roth IRA for the first time, can I add
to an inherited Roth IRA or do I have to start a new account?>>


No, you cannot add money to an inherited IRA, Roth or otherwise. Further, unless you are the surviving spouse of the decendent, you must begin taking money out of that IRA. In general, you may take money from that IRA in as an annuity based on your life expectancy or receive all assets no later than December 31 of the fifth year following the IRA owner's death. If you elect to take the money as an annuity, then the first payment must be made no later than December 31 of the year following the year of death. See IRS Publication 590 (Individual Retirement Arrangements) for details. You can get that publication at http://www.fool.com/money/allaboutiras/allaboutiras.htm. The money you take from the Roth won't be taxed, but the money from a traditonal IRA will be. Also, if the owner of a traditional IRA was older than age 70 1/2 at the time of death, then the money must be taken at least as fast as it would have been withdrawn had the owner not died.

<<Next question concerns assent allocation. I have an IRA and a Roth
IRA (both inherited) that are currently in mutual funds. My wife
and I will be opening our own Roths this year and also an after tax
account, so that is five accounts. I want to get out of the mutual funds
and invest in 10 or so Rule Maker companies. Does it matter how I
divide the stocks among the different accounts? Should each account
have some diversification among the 10 stocks? My investing horizon
is very long term.>>


Tread carefully how you invest the inherited IRA money. If you must move it to make those investments and wish to avoid complications to include taxation of the traditional IRA, there are very specific rules for doing so, and not all custodians will go along with your desire to move the funds for different investments. With the Roth, that's not a big problem, but with the traditional IRA you could end up paying income taxes faster than you need or want to do.

Regards..Pixy
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Thanks for the quick response Pixy. I was the beneficiary on both the traditional
and the Roth and both accounts have been transferred into my name. I am going
to make withdraws based on my life expectancy rather than a lump sum. Now
that they have been properly transferred to my name can I not transfer them to
another custodian (one with no fees and low commissions)?
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Dougiedo writes:

<<Now
that they have been properly transferred to my name can I not transfer them to
another custodian (one with no fees and low commissions)?>>


I hope they haven't been transferred to your name for your sake because that will immediately void them and make them payable. They should be titled in the name of the decendent for the benefit of you. Such as " IRA of I.M. Gone, deceased FBO Dougiedo."

If they are not titled in that regard, then I'm sad to report that lifetime payments will not be available to you. OTOH, if they are, then by using the same kind of titling you could get them transferred to a new custodian. Be aware, though, that custodians regularly screw up this kind of transfer. Too often the gaining custodian will put the IRA in your name instead of in the name of the deceased. When that happens, it's too late and your payment schedule will be voided by the IRS. Just exercise extreme care here.

Regards..Pixy
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thanks again Pixy for the response.

On some of the earlier statements it said xxx deceased FBO my name as you said it should be, but I noticed on the statement I just received that the account name is: my name FBO. What does FBO mean?

Also, if they did not set this up correctly is there anything I can do now to fix it?

Thanks again.
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Dougiedo asks:

<<I just received that the account name is: my name FBO. >>

It means "for the benefit of."

<<Also, if they did not set this up correctly is there anything I can do now to fix it?>>

It sounds as if they have set it up correctly, but check with them to be sure. If they have not, it's now too late to undo the transaction/transfer as the IRA money has been moved. The IRS will consider the distribution as having taken place the moment the money left the old IRA. That's why it's so vitally important to ensure this stuff is done correctly before the transfer takes place.

Regards..Pixy
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