Ed Slott published an article yesterday on PLR 200811028 that I found very interesting. Essentially, this PLR clarifies that the life expectancy method is the default on non-spousal inherited IRA’s, where the IRA owner died prior to the RBD.

In summary, a daughter inherits a father’s TIRAs who dies prior to the RBD, but fails to take the RMD by the end of the year following death, or the next year eather. Then in the 3rd year following death, takes the preceeding 2 years worth of missed RMDs AND pays the 50% underwithdrawal penalties (ouch). The PLR essentially gave the beneficiary the right to do this and avoid defaulting to the 5 year rule.

Also, the article points out the importance of reading the custodial agreement to see if the IRA account still defaults to the 5 year rule if the first RMD is missed, which Ed seems to think is enforeable by the custodian, even though the IRS’s PLR seems to suggest otherwise.

FYI

BruceM