Status of Inherited IRAs after RBD

Submitted by Dennis A. Parker on Wed, 2022-08-31 22:46

Where are the current IRS regulations relative to IRAs inherited after 2019 by a non-spouse beneficiary – Is the beneficiary required to take RMDs on the inherited IRA in the years 1-9 before the complete distribution in year 10?



Submitted by Alan - IRA critic on Wed, 2022-08-31 23:56

  • The actual regulations remain in proposal status, and it is not clear what changes will be made to the proposal when it becomes final. Many aspects of the proposal have been criticized by many influential retirement plan organizations as being unnecessarily complex, which will likely prolong the period of time before the final Regs are issued. To your question, the proposed Regs state that if the IRA owner passed prior to RBD, a 10 year rule non spouse beneficiary would not be subject to annual RMDs, just total distribution at the end of year 10. If the IRA owner passed on or after RBD, then annual beneficiary RMDs in years 1-9 would be required in the same amount as an EDB would need to distribute, then the remaining amount distributed in year 10. 
  • If the beneficiary is an EDB such as a spouse not electing ownership, a disabled or chronically ill beneficiary, a minor child, or someone not more than 10 years younger (measured by actual DOBs, not calendar years), the annual beneficiary RMDs would be determined similarly to the pre Secure Act Regs. If the owner passed prior to RBD, the EDB could also opt out of EDB status and withdraw under the 10 year rule. 
  • For EDBs older than a post RBD decedent, the annual LE RMDs based on the decedent’s age would have to terminate in the year the RMD divisor based on the BENEFICIARY age would have reached 1.0 or less and the remainder of the balance distributed, therefore the benefit of using the decedent’s age would be limited in scope. 
  • Successor beneficiaries will also be subject to special rules that vary depending on the above variables required of the designated beneficiaries they inherit from. 

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