Inherited an IRA from a Younger Silbing

Submitted by Brian Matter on Mon, 2022-12-12 22:50

Teresa passed in 2022 at age 61. Probate court indicated that her siblings would split the 401(k) and each receive half. The oldest sibling was 74 when Teresa passed. Is the oldest sibling considered a designated beneficiary and would that allow them to take the minimum distributions based on the single life table?

Everything I’ve read with the 10 year rule emphasizes someone not being more than 10 years YOUNGER, but what happens when a beneficiary is more than 10 years OLDER? Are they considered an eligible designated beneficiary?

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Permalink Submitted by Alan - IRA critic on Mon, 2022-12-12 23:16

If the estate was the beneficiary as suggested by probate court involvement, the 5 year rule will apply with death prior to RBD, but almost all 401k plans will push out a lump sum distribution to the estate ASAP. There are no designated beneficiaries when the estate inherits and accordingly under IRS rules the inherited 401k is not eligible for a direct rollover to inherited IRAs.
Now IF the siblings were named on the plan or were default plan beneficiaries, they would be designated beneficiaries. All siblings older than 51 would be EDBs, and if direct rollovers were made to separate inherited IRAs by 12/31/2023, each could take annual RMDs over their single life expectancy. The 10 year rule would not apply. Note that “not more than 10 years younger includes all older beneficiaries, and the 10 years is measured by actual DOBs to the day, not by the calendar year of birth.

Permalink Submitted by Brian Matter on Tue, 2022-12-13 15:30

Thanks for answering!

Permalink Submitted by Bruce Steiner on Sun, 2023-01-01 20:42