2nd generation inherited IRA

Submitted by Ana Moreen on Fri, 2019-12-06 14:12

I have inherited an IRA from my mother, who, in turn, inherited the IRA from my sister. My sister was 60 when she died (2011) and left the traditional IRA to our mother, who has been taking RMD’s based on her life expectancy until she passed away in 2018. I have then inherited this non-spousal IRA. I am being told conflicting advice: 1) I am being told to completely take all the money out of the IRA and pay the taxes accordingly based on my income bracket or 2) Continue taking out RMD’s based on my mother’s life expectancy schedule at age of death. Can you give me some advice as to what I should do?! Thank you in advance.



Submitted by Alan - IRA critic on Fri, 2019-12-06 14:54

  • Advice #2 is correct. You should use the same divisor that your mother would have used, which means that you will have to drain the inherited IRA quite soon. You can check the divisor by entering Table I using the age your mother attained in 2012 and then reducing that divisor by 1.0 for each year after 2012.  That said, if this divisor has dropped below 1.0, then your 2019 RMD for 2019 would likely drain the IRA or come very close. Therefore Advice #1 could turn out to be correct although the entire process may not have been explained.  You are also responsible for completing mother’s 2018 beneficiary RMD if she did not complete it before passing. 
  • Your inherited IRA title should show you as the beneficiary of your mother unless the custodian wants all 3 names to be included. You are referred to as a successor beneficiary because you were not the designated beneficiary of your sister.

Submitted by Ana Moreen on Tue, 2019-12-10 14:06

My mother was 91 at the time of death, and she was 84 when she inherited the IRA. So this table one only goes to 82 years of age.  Does this mean I need to take out the entire amount of the IRS because the table only goes to 82 years of age??

Submitted by Alan - IRA critic on Tue, 2019-12-10 15:25

Not sure what table you are looking at, but the single life table runs to 111. The attained age used by your mother is not necessarily her age at sister’s death, but is the age she would have been at the end of 2012. That would be either 84 or 85, so her initial divisor from Table I for her first beneficiary RMD in 2012 would be either 7.6 or 7.1 since mother would have been either 85 or 86 on 12/31/2012. The 2019 divisor would then be either .6 or .1. In either case, without an extremely high % of gain in 2019, you would need to drain the inherited IRA this month. Therefore, as it turns out given their ages, Advice #2 produces the same end result as Advice #1. It is not clear whether the issuer of Advice #1 actually knew the numbers or just turned out to be correct because of the numbers.

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