Inherited IRA/payout options
Hi everyone,
I apologize in advance as this is a basic question.
IRA owner, age 75,dies and IRA primary beneficiaries are his brother and sister, equally. Correct to say that each beneficiary may roll over to inherited IRA with pay out over each beneficiaries’ life expectancy; or, does pay out have to be over five (5) years? Thanks for your help and expertise. Susan Grady
Permalink Submitted by Alan Spross on Mon, 2012-07-30 17:03
Since owner passed after his RBD, the 5 year rule is inapplicable. If each beneficiary creates separate inherited IRA accounts no later than the end of the year following the year of the owner’s death, each beneficiary can use their own life expectancy for RMDs from Table I. After the first year divisor is determined that divisor is reduced by 1.0 in each successive year.
Alternatively, if any of the siblings are older than the decedent, they can use the decedent’s remaining life expectancy instead of their own. This would reduce RMDs for older beneficiaries.
If they are younger, but fail to create separate inherited IRA accounts by the deadline, then they must use the life expectancy of the older beneficiary, although they could also use the life expectancy of the decedent if oldest beneficiary was older than the decedent.
Most importantly, the movement of funds to another account or custodian must be by direct trustee transfer. An actual rollover is not permitted.
Permalink Submitted by Susan Grady on Tue, 2012-07-31 11:12
Alan,
Thank you very much for responding. I appreciate your expertise and knowledge.
Susan Grady