Inherited IRA ALAR rule
I keep reading conflicting accounts of the ‘At Least As Rapidly’ rule for those Designated Beneficiaries who inherit an IRA from the decedent who died after their Required Beginning Date.
My understanding has been the DB, if younger than the deceased IRA owner, must at a minimum withdraw in years 1-9 an RMD that is what the deceased owner would have withdrawn. But I’ve just read that the years 1-9 minimum is based on the beneficiaries single life table. But to meet the ALAR rules, wouldn’t it be based on the decedent’s life expectancy, and wouldn’t the single life table also be used with one year subtracted for each successive year?
Permalink Submitted by Alan - IRA critic on Fri, 2023-01-27 18:50
The ALAR concept just refers to the RMD method used by the decedent, not to the exact dollar amount. The beneficiary’s single life expectancy from Table I would apply in this situation with the divisor reduced by 1.0 each year in year’s 1-9. Now if the beneficiary had been older than the decedent, ALAR permits the beneficiary to use the longer LE of the decedent with the additional requirement that the inherited IRA be drained no later than the year the beneficiary’s divisor would have reached 1.0 or less should this occur before the 10 years is completed. This would therefore require monitoring divisors for both the decedent and the beneficiary, most likely an unnecessary over complication of the rules.
Permalink Submitted by BruceM on Fri, 2023-01-27 19:54
Ok….but I still find ALAR confusing, as it suggests the beneficiary must withdraw at least at the rate the deceased owner was.So, as an example, an 80 year old has a TIRA with a 2021 end of year balance of $300,000 and so had an RMD in 2022 of 300000/20.2 = $14,851 which she took and then died later 2022 year, naming her 19 year old grandchild as the sole DB. If the TIRA balance at the end of 2022 is $320,000, then the ALAR RMD for the beneficiary the next year would be 320000/65 = $4,923, with each of the next 8 years reducing the denominator by 1…..correct?