Successor beneficiary IRA and Secure Act
I am struggling to find an answer to my situation. My wife’s 82 year father passed away about 6 years ago and was taking IRA distributions. She and her two sisters were equal beneficiaries. Since then, she had been taking RMD’s based on her life expectancy as an old stretch IRA. My wife passed away last fall on 10/1/20 at 57 after the Secure act was passed. I have now become a successor beneficiary to this IRA and being a spouse am an eligible beneficiary, but I have not found clear guidance on what schedule to use for the RMD’s. I am currently 57…
I thought I had read that the RMD’s could be based on my late wife’s life expectancy and also have seen reference to the 10 year rule applying, so I’m not quite sure what to follow. I have read a lot online and some info gets close to my scenario, but not clearly enough. Please help.
Permalink Submitted by Alan - IRA critic on Tue, 2021-08-24 21:51
Once a non spouse inherited IRA, it must remain an inherited IRA, but when the beneficiary passes after 2019 the Secure Act states that the 10 year rule applies to the successor beneficiary.Therefore, you have no annual RMDs, but must drain the inherited IRA by 12/31/2030. Therefore, you might benefit from taking some distributions before then just to avoid a large tax bill in 2030. And if you are still working and not maxing out your own workplace retirement plans, you could use any inherited IRA distributions (taxable but no penalty) to subsidize making more contributions to your own workplace plan. The tax savings would offset the inherited IRA tax bill. To be clear, you cannot assume ownership of the inherited IRA because your spouse was not the original owner.
Permalink Submitted by John Bauman on Thu, 2021-08-26 18:27
Thanks for the information Alan!