Inherited IRA RMD
I have a CPA telling me that RMD is a term that only applies to Traditional IRA’s and not to Inherited IRA’s. He says the correct term for Inherited IRA’s is Substantially Equal Payments (which I thought was for 72t’s). He says the waiver for 2009 RMD’s therefore does not apply to Inherited IRA’s. He also states that the first distribution from an Inherited IRA has to be taken in the year of death. I was under the impression that it had to be taken NLT 12/31 of the year after death. Finally, is the age that is used to calculate the life expectancy factor for an Inherited IRA beneficiary based on what the beneficiary’s age will be at the end of the year of the first distribution, or what their age actually is at the time of the first distribution? Thanks.
Permalink Submitted by Alan Spross on Fri, 2009-08-07 22:47
This person is providing you with a wide swatch of misinformation:
1) RMD applies to any IRA type from which the tax code requires an annual distribution. This includes both inherited non spouseTIRA and non spouse inherited Roth IRA accounts as well as certain spousal inherited TIRAs retained in beneficiary form.
2) The 2009 RMD waiver DOES apply to inherited IRAs of all types as well as owned IRAs.
3) Sub Equal Payments are a way of avoiding an early distribution penalty for different types of accounts. An inherited IRA is not subject to that penalty in any case.
4) First RMD on an inherited IRA is only due in the year of death if the IRA owner did not take their own RMD for that year or prior year. If the owner was current including the year of death, the first RMD is due by the end of the year following the year of death, as you indicated.
The beneficiary’s age as of 12/31 in the year following the year of owner’s death determines which divisor to use if the life expectancy rules apply. The date within that year that the RMD is distributed is immaterial. Of course, 2009 distribution year RMDs of all types have been waived.