Inherited IRA (client passed away 2020)

Submitted by Wendy Mommaerts on Fri, 2020-10-30 15:56

We have a client who inherited her mother’s IRA (mother passed away 6/1/2020). There is no longer the stretch IRA and the beneficiary must deplete their inherited IRA by Dec 31st of the 10th year anniversary of the IRA owners death.

Do we start the 10yrs in 2021 where the inherited IRA be depleted by 12/31/2031?



Submitted by Alan - IRA critic on Fri, 2020-10-30 20:13

The 10 year period starts in 2021, but the inherited IRA must be drained by 12/31/2030, the last day of the 10th full year after the year of mother’s death.

Submitted by Erika Courtois on Tue, 2020-11-03 23:42

I am in the same boat as Wedney’s client.  My other passed away this year and I am the beneficiary of her Keogh, IRA and Roth.  I understand I am subject the SECURE Act’s 10-year drain rule.  Are the “RMDs” I have to take out technically referred to as RMDs or are they defined as something with a different term? Also, her accounts were transitioned to me as separate 1.) an inherited BDA IRA (Keogh and IRA) and 2.) an inherited BDA Roth.  Would I be able to leave the BDA Roth untouched until 2030 and let it grow and only take 10% each year from the BDA Keough-IRA ?Thank you. 

Submitted by Alan - IRA critic on Tue, 2020-11-03 23:58

  • Under the 10 year rule, there is no RMD until the 10th year when any remaining balance must be distributed. Client could handle the two respective inherited IRA types as you indicated, and because the Roth distributions will be tax free, it is best to wait until near the end of the 10 th year. For the inherited TIRA, client can be flexible but if your taxable income is stable, it does make sense to target the annual distributions to equalize taxable income each year, which may help client to avoid spiking their marginal rate in any particular year. 
  • Finally, remember that if client is not more than 10 years younger than SO, they qualify for an exception to the 10 year rule under the Secure Act, and there are a couple other exceptions as well.
  • Counting 2020, there are actually have 11 tax years to utilize for the inherited TIRA if the 10 year rule applies.

Submitted by Erika Courtois on Thu, 2020-11-05 00:45

Thank you Alan! 

Add new comment

Log in or register to post comments