2021 Inherited IRA Distribution

Submitted by Jennifer VanLandingham on Wed, 2020-05-06 11:35

With the waiver of 2020 RMDs under the CARES Act, what are thoughts on the formula for calculating 2021 RMDs from an Inherited IRA using the Single Life Expectancy Table? For example, the 2020 RMD would be based on a Life Expectancy factor of 37.9 and 2021 would normally be 36.9 (one less than the prior year). Due to the waiver, is it fair to assume the 2021 RMD would still be 36.9? Thanks for any feedback.



Submitted by William Tuttle on Wed, 2020-05-06 11:42

Correct

Submitted by Chuck 2009x on Fri, 2020-05-08 13:33

Note that there is a proposal to revise the life expectancy tables beginning with 2021.  It may happen, it may not. The principal for determining the divisor will probably be the same, the method you described (find the age the beneficiary attained in the first RMD year and subtract 1 for each successive year).  But you may find that due to a change in the tables, it may not be 36.9. I suppose it’s even possible (but maybe unlikely) that in the situation where the beneficiary’s first RMD year would have been 2020, that the anchor for the divisor will be changed to age attained in 2021 instead of 2020. There are plenty of websites that will report on this if it changes, but here is a page that may help track it. https://www.federalregister.gov/documents/2019/11/08/2019-24065/updated-life-expectancy-and-distribution-period-tables-used-for-purposes-of-determining-minimum 

Submitted by Alan - IRA critic on Fri, 2020-05-08 15:58

  • Due to the effects of the pandemic on life expectancies and the IRS’ ability to address this many issues in 2020, it is very possible that the chances for implementation for 2021 are not quite as good as they were. Probably still very good, but maybe not quite so good. However, assuming the new tables are to be adopted for 2021, any beneficiary RMDs for those already receiving RMDs will need to be RESET to the new tables. 
  • For example, if the owner passed in 2017, the divisor in the new tables based on the beneficiary’s age at the end of 2018 would have been the initial divisor. That divisor is then reduced by 1.0 for 2019, another 1.0 for 2020 even though there is NO 2020 RMD, then another 1.0 for 2021.  If the beneficiary’s current RMD is determined using someone else’s age for various reasons, the above process of resetting would also start by re determining what the initial divisor would have been. 
  • Of course, for owner deaths post 2019 (post 2021 for govt plans) with DBs but no eligible DBs, none of this will matter since the 10 year rule will apply.

Add new comment

Log in or register to post comments