Bene IRA–Correct Life Expectancy to Use?
Under SECURE 2.0. it is my understanding the non-spousal beneficiaries of Traditional IRA are subject to the 1-year rule but are required to take RMDs according to their own life expectancy (IRS Publication 590 Table 1–Single Life Expectancy). Because the ruling was unclear for 2020 and 2021, the IRS is forgiving penalties for not taking RMDs that year.
So, let’s support the IRA owner died in 2020 and was already taking his RMDs. My question is if his child turned 45 in 2023, do they use the factor from the Table 1 of 41.0, OR do they have to adjust that factor for the two years the RMD was not taken and therefore the factor becomes 39.0?
Thanks in advance!
Permalink Submitted by Alan - IRA critic on Tue, 2023-06-13 17:13
There is no adjustment if annual RMDs were not taken in 2021 and 2022, but the divisor does have to be reset due to the new RMD tables effective in 2022. That divisor would have been 42.9 (bene age 43 in 2021). Subtracting 1.0 from that divisor for two years and the 2023 divisor is 40.9. It is expected that the 2021 and 2022 RMDs will not have to be made up when the final Regs are issued, but the inherited IRA must still be drained in 2030. This beneficiary will have to take out much more than the RMD each year if they want to roughly equalize the distributions over the last 8 years and prevent a large taxable distribution in 2030. Finally, note that these annual RMDs only apply if the owner passed on or after their RBD, as in this example.