inherited IRA

Submitted by Jon Heller on Tue, 2022-08-02 17:40

What is the rule for inherited IRA’s for accounts where the original owner was in RMD. I am reading that the beneficiary would have to start taking annual withdrawals versus the option of deferring up to 10 years.



Submitted by Alan - IRA critic on Tue, 2022-08-02 18:03

  • The rules in this case are in limbo. As proposed by the IRS, this beneficiary will have to take life expectancy RMDs in years 1-9 and then drain the inherited IRA in year 10. Therefore, the beneficiary would have to adhere to both requirements.  But there is plenty of opposition to this complication, so will have to wait until the proposal becomes final. And if the proposal is upheld the IRS also needs to determine how to handle the 2021 and 2022 RMDs that many will have not taken.
  • That said, many beneficiaries are already planning to drain the inherited IRA ratably throughout the 10 years to avoid a large tax spike in year 10. A ratable distribution will almost always be more than the annual RMD, therefore those draining the IRA by a pro rated amount each year will automatically satisfy the RMD and would not care how the ruling ends.

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