RMD of inherited IRA

Submitted by jeffreyrainer on Tue, 2022-09-06 16:47

My client age 37 inherited his Father’s ( dad was 72) IRA in 2020. He transferred the inherited IRA to us in 2021. No RMD’s have been taken so far as the understanding was that he just had to deplete the account by the end of the 10th year.

I just attended the Instant IRA Success workshop in Nashville in July. What is the correct understanding on the 10 year rule? Because Dad was taking RMD’s? Was the son supposed to be taking RMD’s based on the single life expectancy table?
And if he didn’t what needs to be done? Obviously in 2020 RMD’s were waived but what about the 2021 RMD that my “now” client didn’t take? Does he just take 2 RMD’s this year? Is there anything to do? Did the 10 year rule always say that RMD’s always have to be taken?
Thanks,
Jeff



Submitted by Alan - IRA critic on Tue, 2022-09-06 20:48

  • Need to know Father’s DOB and DOD to determine if he passed prior to or after his RBD. If prior, then no annual RMDs are required within the 10 year rule. If after RBD, proposed IRA Secure Act Regs will require annual RMDs, but even if this contested provision survives, there is a good chance that 2021 RMDs will be waived, and the Regs were to be effective in 2022. In short, if he passed after his RBD, annual RMD requirements remain in limbo. Of course, he might still take annual distributions anyway to avoid a tax spike in year 10. 
  • The actual Secure Act said nothing about annual RMDs within the 10 year rule. This is the IRS’ interpretation, and who knows when the proposal will become final?

Submitted by [email protected] on Tue, 2022-09-06 21:13

Thanks, Father’s DOB was 10/1948. So it sounds like leave 2021 alone unless we hear a finalized ruling.

Submitted by Alan - IRA critic on Tue, 2022-09-06 22:56

Yes. A 10/1948 DOB means father reached 70.5 in 2019 and his RBD was 4/1/2020. If he passed prior to 4/1/2020 then the 10 year rule would apply without any annual RMDs in years 1-9. Otherwise, if he passed 4/1 or later, the need to take annual RMDs is likely, but the IRS may be convinced to rethink the proposed annual RMDs as major retirement organizations have protested this proposal and a few others that seem to add unnecessary complexity that would hinder compliance with the final Regs. The longer it takes to release the final Regs, the more likely that 2021 RMDs and also 2022 RMDs will be waived, even if annual RMDs have to start in 2023.

Submitted by [email protected] on Mon, 2023-01-09 18:44

Alan, does the Secure act 2.0 change this response? Does the client now how to take RMD’s? Clients Father did pass in Feb. of 2020.

Submitted by Alan - IRA critic on Mon, 2023-01-09 19:41

2.0 does not affect this case. Client passed prior to the 4/1/2020 RBD, therefore the 10 year rule without annual RMDs in years 1-9 applies to son. While the proposed Regs are still not issued, the applicable dates here do not fall into any questionable range. Even though father may have taken a 2019 distribution that was an RMD, the determining factor here is the actual RBD date, and father passed prior to that date.

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