Bene IRA distributions
Clients nephew died in 2018 at the age of 69. His parents inherited his IRA. They die in 2019 and leave the money to the clients aunt and uncle. Whose age is used for calculating the RMD. The aunt is 80 and the uncle is 84. Thanks for your help
Permalink Submitted by Alan - IRA critic on Mon, 2021-11-08 19:54
If each parent inherited an IRA from the nephew, each parent would have a beneficiary RMD in 2019 based on their own single life expectancy. That life expectancy divisor for 2019 is reduced by 1.0 each year, including 2020 when no RMDs were required. That life expectancy schedule will continue for aunt and uncle, who apparently will inherit two IRAs as successor beneficiaries, with different divisors unless parents were the same age. In other words, the RMD divisors will continue to be the same as the parents would have used had they lived. The Secure Act does not affect this scenario since all deaths were prior to 2020.
Permalink Submitted by Rick Tenison on Mon, 2021-11-08 20:40
So the father was 94. We should use his age for the distributions?
Permalink Submitted by Alan - IRA critic on Mon, 2021-11-08 22:06
Yes, for the IRA he inherited, his divisor for 2019 would have been 4.3, 2.3 for 2021, 1.3 for 2022, and the balance in 2023. Very little stretch is left when a retirement account is left to a much older beneficiary. And if mother also inherited an IRA, her divisors are based on her age in 2019, which then carry through to the aunt and uncle respectively.
Permalink Submitted by Gregg Miller on Tue, 2021-11-09 11:22
What if the parents had passed on post-SECURE? How would the RMD divisor have changed for the final successory beneficiary aunt and uncle? Would it have been eliminated (subject to 10 year emptying rule) had the death of the parents occurred in 2020, post-SECURE?Curious… SR
Permalink Submitted by Alan - IRA critic on Tue, 2021-11-09 14:57
Yes, in that case aunt and uncle would be subject to the 10 year rule, having additional years to drain the inherited IRA. There will be a few cases where the 10 year rule is actually beneficial such as when beneficiaries are older than the decedent or older than a pre 2020 stretch beneficiary.