Inherited IRA RMD
Mary an 82 year old in 2021 single person, inherited in June 2017 a traditional IRA from a friend who was 80 at that friend’s death in June 2017 with a balance as of 12/31/20 of $100,000
Mary inherited a Roth IRA also in June 2017 from the same friend with a balance of $60,000 as of 12/31/20. No withdrawals were taken in 2020. However Mary took RMD from both accounts for years 2017, 2018 and 2019.
Questions:
1. How much does Mary have to take from the inherited traditional IRA in 2021. How is that computed
2. How much does Mary have to take from the inherited Roth IRA in 2021. How is that computed
3. is there a rule that Mary has to completely take out the outstanding balances of each of those IRA’s as of 12/31/21, in 2021, because 2021 is the 5th year after the inherited year (2017).
4. If statement 3 above is incorrect. When and how much does Mary have to take the remaining balance of each of those IRA’s. Can she continue taking RMD after 2021 for each of those two IRA’s. And if so how are those future RMD’s computed.
5. Is there a so called 5 year rule or 10 year rule whereby inherited IRA’s from 2017 have to be taken out over one of those periods. And if so which is the correct period 5 years or 10 years from the year those IRA’s where inherited. Or some different period?
Permalink Submitted by Alan - IRA critic on Tue, 2021-12-07 12:32
There IRAs were inherited prior to the Secure Act, and apparently Mary has been using life expectancy RMDs starting in 2018, based on her attained age in 2018. The 5 or 10 year rules do not apply here, even if Mary inherited through friend’s estate. Her 2018 divisor for both inherited IRAs was 10.8 in 2018 assuming her attained age in 2018 was 79. This divisor reduces by 1.0 each successive year, so 9.8 in 2019, would have been 8.8 in 2020 but RMDs were waived for 2020. Divisor for 2021 will be 7.8 into the 12/31/2020 values. These apply to both IRA types. If she figured her RMDs incorrectly for 2018 and 2019 and fell short, she needs to make up the difference ASAP. If she inherited through friend’s estate instead of being named directly on the IRA agreement, please advise as that changes things. Finally, there are new RMD tables going into effect in 2022, so the 2022 divisor will have to be reset. It will not be 6.8.
Permalink Submitted by alberto vega on Tue, 2021-12-07 20:04
Mary inherited both IRA’s directly from the decedent in 2017, not from the estate.In your reply you indicate Mary could wait until 2018 to take the first RMD, not 2017 (the year of death). Is that because Mary needs to know the balance as of 12/31/17 to take the correct RMD?So the new 2022 tables would apply to Roth and traditional IRA’s even if the RMD’s started in previous years.Another question can Mary take the RMD from the inherited regular IRA from her own traditioal IRAsAnd can Mary take the RMD from the inherited Roth IRA from her traditional IRA’s. Or are the answers different to these two IRA withdrawal questions
Permalink Submitted by Alan - IRA critic on Tue, 2021-12-07 21:21
Since decedent was RMD age, Mary must determine whether the decedent completed the 2017 RMD before passing in June. If not, Mary was responsible for completing the rest of that RMD by the end of 2017. It might be challenging to determine what that RMD was and whether the decedent distributed at least that amount.
Mary’s first beneficiary RMD is for 2018, based on the 12/31/2017 balance using the divisor indicated above.
The 2022 tables apply only to 2022 and beyond, but the 2022 divisor must be reset as if these new tables applied all along. The 2022 divisor will be 7.9, 2023 6.9 etc with 1.0 divisor reduction each year.
Mary must take the inherited TIRA RMD from the TIRA and the inherited Roth RMD from the inherited Roth separately. She cannot combine these in any way, or cannot combine the inherited IRA RMDs from her own IRA RMDs.