Inherited IRA
I have a client who passed away in 2023 at the age of 53. Her father was the primary designated beneficiary of her Traditional IRA, and is an EDB as he is 75 years old. He does not need the IRA to fund his retirement living expenses, but does not want to disclaim the asset. My question is would he be better off using the new 10-year rule, or taking annual RMD’s under the old rule over his remaining life expectancy? I do not know his individual tax situation as of yet.
Permalink Submitted by Alan - IRA critic on Wed, 2023-05-03 18:18
It depends on his particular tax situation and that of the beneficiary he names. LE RMDs are usually more beneficial and will stretch the RMDs for 4 years longer (14 years beginning in 2024) than the 10 year rule. His own beneficiary will get a new 10 year rule if he stays with LE, but if he opts into the 10 year rule his own beneficiary will also have to drain it when father would have had to (2033). On the other hand, if the LE RMDs in years 1-9 are going to trigger IRMAA or otherwise increase his taxes in years 1-9, he could opt into the 10 year rule and bear the tax consequences at the end of that period. He must make his decision to opt out of EDB treatment by year end 2024, so there is plenty of time to make his decision.