RMD options
My wife died Nov 15 2020 . Her Tax deferred annuity was moved to an inherited IRA account in 2021 . What are my options on RMD for this account, I am 89 years old.
My son who is 59 also received some of theses funds in 2021 and has an inherited IRA account what are his options.
Thank youn
Permalink Submitted by Alan - IRA critic on Thu, 2022-04-07 02:19
Your best option is to elect to assume ownership of your inherited IRA. If you advise your IRA custodian of this election you will be treated as the owner for the entire year of 2021, and therefore will reduce your RMD for 2021 by a considerable amount because you will use the new Uniform Table to detemine your RMD. The IRA custodian will transfer your balance to a new IRA account titled only in your name without reference to the inherited status. Be sure to name your own beneficiary on the account ASAP. If you already have your own IRA, you can transfer the inherited IRA balance into your existing IRA, combining into just one account.
Your son must continue his inherited IRA and the new proposed Secure Act regulations will affect his beneficiary RMD. Under the proposed regulations, because your wife presumably passed after her RBD, your son will not only be subject to the 10 year rule requiring him to drain the inherited IRA by 12/31/2030, he will also have to take annual RMD for years 1-9 (2021-2029). Since these provisions are controversial, they may be dropped, and in any event because 2021 is over, even if they are adopted he will probably not have to worry about a missed 2021 RMD, and may not have to take a 2022 RMD either. He will have to check with his IRA custodian toward the end of the year to determine if a 2022 RMD is required. Because the account must be drained by 2030 anyway, many beneficiaries would want to take annual distributions to avoid a large tax bill in 2030, or he may need the money. However, what will be officially required will be in limbo until late this year.
For both of you new RMD tables were place into effect this year by the IRS. For you, if you assume ownership use the Uniform Table for your age at the end of 2022. Your son must use the single life table, and he must use that table to determine what his divisor would have been for 2021 with his age at the end of 2021 under the new table. He then must reduce that divisor by 1.0 for each year after 2021 if annual RMDs become official until 2030 arrives and he must drain the IRA.