2nd Generation Beneficiary IRA

Submitted by Shannon Nies on Wed, 2014-02-12 16:21

My Mom inherited an IRA from my Father in 2004 – both were age 73 at the time of his death. She took it as an “Inherited IRA” and took RMD’s based on her age.

Mom recently passed away and her three children are her beneficiaries. So, now we each have a 2nd Gen Bene IRA.

What RMD rules do we follow each year?

Thank you,
Taxed Enough!



Submitted by Alan - IRA critic on Wed, 2014-02-12 16:39

  • Your Mom should have rolled this over to her own IRA, as her RMDs would have been much less. In addition, her beneficiaries would be able to use their own life expectancies for RMDs rather than continuing hers, so much of the available stretch has been lost. However, there may still be a chance for you to use your own life expectancy as there is a rule that states that if in any year your Mom failed to take the full RMD as a beneficiary (using Table I), she defaults to ownership status. So do some research to check if she took an adequate RMD each year starting in 2005. Omit 2009 because RMDs were waived that year.
  • If you find that all her RMDs were adequate, then all of you will have to use the divisor she would have used for her year of death RMD and reduce that divisor by 1.0 each year. It appears that the IRA would have to be drained by the end of 2018. You can still create separate accounts for each of you, but that will not affect your RMDs unless you find that your Mom fell short on one of her RMDs before her year of death and therefore became the IRA owner.
  • If your Mom passed this year, you must complete her RMD if she had not taken it. For this one year, any of the beneficiaries can take the year of death RMD in any combination they wish.

Submitted by Shannon Nies on Wed, 2014-02-12 18:50

Regarding this statement: “It appears that the IRA would have to be drained by the end of 2018.”  Are you talking about the 5 year rule?  Everything I have read states that the 5 year rule only applies if the owner died before the Required Beginning Date.  I have been under the impression that we could continue taking annual RMD’s and not have to withdraw all funds within 5 years.  Please clarify.Thank you!

Submitted by Alan - IRA critic on Wed, 2014-02-12 20:59

The 5 year rule does not apply, but I came up with 2018 by looking a Table I where your mother’s applicable distribution period (RMD divisor for age 84 was 14.1. That means 14 years starting in 2005, so this period just happens to end around the end of 2018. Just a coincidence that 5 years are left.

Submitted by Shannon Nies on Wed, 2014-02-12 21:05

Thank you for all of the help!  I greatly appreciate the assistance!Smiles!

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