RMD from Inherited IRA
Hello all, I’m asking for an associate who had a client (husband, DOB 1/5/1960) pass away in CA 11/27/2024. He had not reached his RBD. His wife inherited the account; husband was a federal employee, and his death benefit annuity (pre-tax) did not get rolled over until August 2025 to an inherited IRA for her. This was an indirect rollover and taxes were withheld.
The wife’s tax advisor told her that she was required to take an RMD this year; I am assuming she did not elect the 10-year rule, so she would follow the stretch rules, meaning she needs to take RMDs every year based on her life expectancy. This is my interpretation based on the facts I have; looking to verify that this is correct. Our associate doesn’t think the wife needs to take an RMD this year. Am I missing something? Thank you in advance!
Best,
Kathryn
Permalink Submitted by Alan - IRA critic on Tue, 2025-09-30 10:49
If wife was the sole beneficiary of the plan, beneficiary RMDs do not start until the year that husband would have reached RMD age, which in his case is age 75. Therefore, no beneficiary RMDs for the next several years.
Once she passes age 59.5, she should elect to assume ownership of the IRA unless she is older than husband and wanted to avoid RMDs until he would have reached 75.
Permalink Submitted by Kathryn Blake on Tue, 2025-09-30 19:23
Thanks, Alan! I believe she is the sole beneficiary. So this falls under Section 327 of SECURE 2.0, where she is treated as her deceased husband in terms of RMDs; she would have the option to take distributions without penalty if needed, since it’s an inherited IRA. Makes sense. I appreciate your help!
Best,
Kathryn
Permalink Submitted by Alan - IRA critic on Tue, 2025-09-30 20:43
Yes, but she only needs to keep it as inherited if she is under 59.5 (or if she is older than him and wants to avoid RMDs longer).
The rule that allows her to delay beneficiary RMDs until spouse would have reached RMD age has existed for 50 years and is unrelated to Sec 327. So unless she is under age 49, she will have no need to ever take a beneficiary RMD as the participant under Sec 327 or as the beneficiary. Sec 327 can be confusing since it presents a third option for surviving spouses.
It’s unlikely that she is NOT the sole beneficiary (spouse would have had to sign a waiver for the qualified plan), but that’s the only scenario where the advisor could have been correct about her beneficiary RMDs starting now.
Finally, with respect to the mandatory withholding from her distribution, she could have replaced that withholding within 60 days to generate a complete rollover and avoid taxes on the amount that was withheld. May be too late now.