The Inherited IRA is non-spouse and passed from 92-year-old mother to 57-year-old daughter as beneficiary.
Q. Can an Inherited IRA be reinvested into one with better returns?
Sure. You have several options. Just be careful *how* you do things, so you're not penalized with an early withdrawal penalty, just because you did it the wrong way. Do understand however, that if your *withdraw* it, then you will pay taxes on it. (unless you roll it into your own IRA.) However, if you withdraw it "correctly", you will not pay the additional 10% penalty.
What the IRA is invested in and where it is housed is totally up to you HOWEVER the inherited non spousal IRA must retain the correct name and cannot be co-mingled into an non inherited IRA... it must always be listed as an inherited IRA ... talk to the IRA custodian for the correct verbiage.
And an RMD cannot be rolled anywhere ... it must be distributed and taxed as ordinary income. However if you are eligible to make a deductible IRA contribution then it may offset the distribution on the tax return as an adjustment to income. And RMD on an inherited IRA is never subject to the 10% penalty because the code in box 7 or the form 1099-R will always be a 4 .. which is why the IRA must remain in the deceased name.
Q. Can an Inherited IRA be reinvested into one with better returns?
It is my understanding that some types of inherited tax deferred retirement accounts can be rolled into the retirement account of the beneficiary recipient. I don't know the rules and details on this. But I would expect that if the deceased was of retirement age at the time of their passing, then the beneficiary recipient would not have that rollover option and would at a minimum, still be required at a minimum, to take the RMDs that were required of the deceased prior to their passing.
Now I don't know the accuracy of the above, as I've not yet had to deal with such a situation.
Spousal beneficiaries can rollover an inherited IRA into their own IRA account. Non-spousal beneficiaries cannot. Non-spousal beneficiaries can either transfer the assets into an Inherited IRA or take a lump-sum distribution. Non-spousal owners of Inherited IRA's are subject to RMD's, but their exact options will depend on their situation. The IRA custodian can advise on this.
As Critter#2 said, once the Inherited IRA is established, the owner can determine how the funds are invested. Most IRA custodians offer a wide variety of investments. It shouldn't be necessary to change custodians in order to change how the funds are invested.
"Can an Inherited IRA be reinvested into one with better returns? "
As pointed out above, any RMD cannot be rolled into any other IRA but must be removed from the inherited IRA.
What *can* be done is a trustee-to-trustee transfer (not a rollover) of an inherited IRA to an inherited IRA with a different financial institution that has the investments that you want. That is allowed as long as the IRA with the new IRA custodian remains in the name of the deceased with you as beneficiary - just as it is now but with a different custodian. Any IRA custodian should be familiar with the procedure and can do that for you.