New 10 Year RMD

Submitted by Robert Wright on Tue, 2019-12-24 12:59

Does the 10 year clock start in the year after the year of death for RMDs for inherited IRAs under the new 10 year clock rule?

So if a person dies in 2020, does the 10 year clock start in 2021?

So for a person who dies in 2020 and leaves an IRA to a beneficiary who isn’t one of the lucky exceptions to the 10 year rule, is the the 10 years 2021 through 2030? Meaning the inherited IRA would have to be completely withdrawn by 12-31-2030. Is this correct?

Thank you in advance for your help.



Submitted by Alan - IRA critic on Tue, 2019-12-24 15:57

The 10 year period for draining the inherited plan ends on 12/31 of the 10th year following the year of death. Therefore, most beneficiaries will actually have 11 tax years in which to spread the distributions if they choose to. You are correct, for a 2020 death the 10 year period does start in 2021 and ends 12/31/2030. Generally, for inherited Roth accounts, it is best to wait until the end of the period and then take a lump sum distribution, since there will be no tax due. Note that the successor beneficiary of an eligible (preferred) beneficiary will be subject to the 10 year rule when the eligible beneficiary passes. The successor does not continue the eligible beneficiary’s RMD schedule.

Submitted by fairira on Tue, 2019-12-24 18:25

To Alan-iracritic:  Your post included “Note that the successor beneficiary of an eligible (preferred) beneficiary will be subject to the 10 year rule when the eligible beneficiary passes.”  Does this mean that the successor beneficiary has only the remainder of the original 10-year period in which to complete the distributions or does the successor beneficiary have a full 10 years to do so?

Submitted by Alan - IRA critic on Tue, 2019-12-24 20:04

An eligible beneficiary is exempt from the 10 year rule, therefore an eligible beneficiary will be taking annual life expectancy RMDs when they pass. The old rules then required the successor beneficiary to continue the RMD schedule of the original beneficiary. That might have been more or less than 10 years. Under the Secure Act provisions, the successor beneficiary of an eligible (ie preferred) beneficiary gets a flat 10 years to drain the account starting with the first year following the year the original beneficiary passed. As indicated, this 10 years might turn out to be longer or shorter than they had under the prior rules. It depends on the age the original beneficiary was when they inherited and how long they lived before passing the account to their successor.

Submitted by Robert Wright on Wed, 2019-12-25 17:59

You mention an “eligible (preferred) beneficiary.” By this, do you mean the several beneficiaries that are exempt from the 10 year rule? e.g. spouses, minors, beneficiaries less ghan 10 years younger than the IRA owner? 

Submitted by Alan - IRA critic on Wed, 2019-12-25 20:45

  • Yes, the new “eligible beneficiaries” are those designated non spouse beneficiaries that remain eligible for the life expectancy stretch, while the others are not. Note that the last group you mentioned should be beneficiaries “who are not more than 10 years younger” than the owner.
  • Some details will need to be cleared up by the IRS. For example, if the owner leaves their IRA 50% to a brother 8 years younger and 50% to a sister 12 years younger, and separate accounts are not created by the deadline, the age of the oldest would govern under the old rules. But since the age of the oldest (brother) will produce a life expectancy stretch and the sister would produce the 10 year rule, I think the simplest way for the IRS to resolve this is to rule that the sister’s life expectancy should be treated as 10 years, but sister would still not have annual RMDs. This is just to determine what brother’s RMDs will be. Brother would then also have to use the 10 year rule, but of course that could be avoided by having him create a separate inherited IRA by the deadline (12/31 of the year following the year of owner’s death). We’ll have to wait and see how this turns out.

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