Succcesor beneficiary of inherited IRA

Submitted by James Magno on Fri, 2020-12-18 00:06

In 2020 taxpayer inherits IRA as a successor beneficiary.
Uncle maintains IRA and begins RMDs at age 70.5
Beneficiary designation is sister(aunt)
That aunt dies; and leaves IRA to nephew by beneficiary designation;
Nephew takes RMDs until he dies.
Now IRA is inherited by his daughter by beneficiary designation.
Broker has advised that IRA must be distributed; that the account can not be maintained as an inherited IRA for daughter(grand niece) of original owner.
Does the IRS have any such rule? Did I miss it?
My tentative conclusion is that, niece can maintain inherited IRA through the remainder of the single life expectancy of initial inherited IRA(aunts life).
However that remaining life expectancy can not exceed 10 years- could be less though. Ten year rule is pursuant to Secure Act.
Broker may have a rule/plan provision that is more restrictive than tax law.
Any feedback is appreciated.
Thanks
Jim Magno



Submitted by Alan - IRA critic on Fri, 2020-12-18 01:48

  • The IRS has no rule limiting how many successor beneficiaries can inherit an IRA, but as you said, it is possible that the IRA beneficiary clause could stipulate a lump sum distribution at some point. That would be rare.
  • Your first sentence suggests that the designated beneficiary passed in 2020, and if so under the Secure Act the 10 year rule would kick in. Regardless of how many successor beneficiaries passed thereafter, the IRA would still have to be drained by 12/31/2030. 
  • If the designated beneficiary passed prior to 2020, then the single life expectancy of the DB would continue to apply to all subsequent successor beneficiaries according to some rather vague wording in the Secure Act. The 10 year rule would never apply. 

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