Calculating Successor Bene IRA RMD final deadline

Submitted by Jeanette LoPiccolo on Wed, 2022-08-24 20:38

Hello!
Our client’s mother died 08/31/2017 at age 79. She left her IRA 100% to her spouse (client’s father), age 83. Spouse elected an inherited IRA (not spousal rollover). Spouse died 2/1/2020 leaving 100% of the inherited IRA to their son. Our client, son, established a bene IRA in 2020 and has not made any distributions yet, We thought that the 10 year rule applied and his only RMD would be 12/31/2030. Is this correct? Thanks in advance!



Submitted by Alan - IRA critic on Wed, 2022-08-24 23:45

  • Father’s RMDs were much higher as beneficiary than if he had assumed ownership. But if father fell short of either the 2018 or 2019 beneficiary RMD, he defaults to ownership status of the IRA, and son is a designated beneficiary rather than a successor beneficiary.
  • If father completed his two beneficiary RMDs on time (based on the age of mother who was younger), son is successor beneficiary and subject to the 10 year rule. However, per the convoluted proposed RMD Regs, son must take annual beneficiary RMDs in the first 9 years. Those annual RMDs would continue father’s RMD schedule with a 1.0 annual divisor reduction adjusted for the new 2022 RMD tables. Since this would drain the IRA in 2029, son would fall one year short of this full 10 year and have these larger annual RMDs based on mother’s age, not on his own.
  • Just to explore the possiblity that father fell short of his beneficiary RMDs and defaulted to ownership, then son’s annual RMDs would be based on him being a designated beneficiary, not a successor beneficiary. Father passed after RBD, therefore son would have to take annual RMDs based on his own LE within the 10 year rule. His annual RMDs would be smaller than the above and he would have to drain the inherited IRA by 12/31/2030, a slightly better outcome than he generated in the above situation as a successor beneficiary.
  • Of course, the proposed Regs are not yet final, and any changes adopted would alter both of the above scenarios. Therefore, the son is currently in a unregulated beneficiary RMD situation.

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