Beneficiary claiming IRA after December 31 following year of death
What happens if beneficiary Inherited account was not established/claimed before December 31st subsequent to IRA owner death? If it was not notified to the beneficiary in time is there any provision determine EDB? In case of spouse should election be made before Dec 31st?
Permalink Submitted by Alan - IRA critic on Tue, 2021-12-28 16:30
A spousal beneficiary qualifying as an EDB has no time limit to have the account retitled since virtually all IRA custodians use LE as the default RMD method. They are still an EDB. However, if they were required to take a beneficiary RMD that was not done before the end of that year and they are the sole beneficiary they would default to ownership status and their RMD would be calculated as an owner, not as an EDB.
Permalink Submitted by Adman Gilly on Thu, 2021-12-30 08:42
IRA has Spouse and Daughter mentined as 50% each and IRA owner has died in 2019 (age 69). This was before SECURE act. Two separate accounts were not created for each beneficiary “before Dec 31, 2020 deadline”. Current value of IRA is $98,600.(1) Can spouse (age 72) rollover 50% to his IRA? Will there be the RMD for 2021 and 2022?(2) Can separate Inherited IRA be established for daughter (age 38)? Can she use SLE and what will be the RMD for 2021 and 2022?
Permalink Submitted by Alan - IRA critic on Thu, 2021-12-30 15:10
Because separate accounts were not created by the 12/31/2020 deadline, the daughter will have to use the age of the surviving spouse for her beneficiary RMDs, of which the first is due 12/31/2021. This beneficiary RMD will be calculated using 50% of the 12/31/2020 balance and a divisor based on the age of the spouse at the end of 2020 reduced by 1.0 for the 2021 beneficiary RMD. This divisor will have to be reset for 2022 due to new RMD tables effective in 2022. Separate inherited IRAs can still be established, but that will not change the daughter’s RMD divisors.
The surviving spouse has the additional option of transferring his interest to his own IRA and using the Uniform table, but since he is not the sole beneficiary of the inherited IRA, the broader options of electing ownership or delaying beneficiary RMDs until deceased spouse would have reached 72 do not apply. There is also a good chance that a transfer or distribution and rollover to his own IRA cannot be completed by tomorrow. Any distribution will be applied to the 2021 beneficiary RMD and not eligible for rollover to the extent of the beneficiary RMD. This transaction is also subject to the one rollover limit per 12 month period. If the 60 day rollover is not available due to this rule, a direct transfer can be done of the entire balance, but the beneficiary RMD will be late and will have to be distributed in 2022 and a 5329 filed to request waiver of the penalty. This is a confusing array of options and requirements, aggravated by the spouse not being the sole beneficiary, separate accounts not be created by the deadline, and tomorrow being the last day to complete 2021 RMDs.