Inherited IRA Question and Confirmation
I just want to be sure I am accurately understanding the new inherited IRA rules. Client’s mother was 85 years old and died March 2021. Client inherited about $1M. Client is 60. Client now has to take an RMD using his life expectancy table for 2022 by December 31. The RMD is based on the value of the inherited IRA as of 12/31/21. We repeat this each year and by the end of year 10 (2031) all the money has to be out. So this year (2022) is the 1st of the “10 years”. Am I missing anything? Thank you!
Permalink Submitted by Alan - IRA critic on Mon, 2022-05-02 19:48
That is correct according to the new proposed Secure Act Regs, but these annual RMDs are controversial and there is a chance this provision will not be included when the Regs go final late this year. If client does not wish to siphon out the funds each year to avoid a tax spike in 2031, it is best for the client to wait until these annual RMDs become official. Note that a roughly equal distribution each year would be greater than the beneficiary RMD, so client may be better off by just distributing the RMD as a minimum.
Separately, the client was responsible for completing mother’s 2021 RMD by the end of 2021 if mother did not do so before passing.
Permalink Submitted by Arek Puzia on Mon, 2022-05-02 20:20
Great, thank you! Yes, the trustee completed the RMD before the assets were distributed.