Inherited Beneficiary Question

Hello,

 

My client Bob died in 1999 in his 40s and left his IRA to his spouse. His spouse did a spousal inherited IRA (did not treat as her own). She passed away in 2019 before the year her husband would have reached RMD age, so she had not started taking any RMDs.

The beneficiaries of the spousal inherited IRA are her three kids. What RMD life expectancy schedule must be used by the kids? Would they use their own ages? Or would they use their Mom’s age, even though she hadn’t started RMDs yet?

Thank you.



There is a special rule for this. When a sole surviving spouse beneficiary passes prior to 12/31 of the year in which the deceased spouse would have reached RMD age, the surviving spouse is treated as the IRA owner for purposes of RMD calculations for their beneficiaries. This means that the beneficiaries can be treated as designated beneficiaries rather than successor beneficiaries, create separate inherited IRA accounts and each could use their own age for beneficiary RMDs (their attained ages in 2020). The separate inherited IRA accounts needed to be created by 12/31/2020 for the children to all use their own ages. If not created by then, the age of the oldest of the 3 must be used.

This rule existed prior to the Secure Act and continues under the Secure Act, so applies to your pre Secure situation as well. There is no 10 year rule involved here, but neither are their 2021-2024 beneficiary  RMDs waived under the IRS Secure Act relief.

These beneficiary RMD should have started in 2021 because 2020 RMDs were waived.

See the last portion of p 9 of Pub 590 B that addresses this situation.

 

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