Decedant passed away in 2022 before he turned 70.
Children inherited the IRA (Split between three adult children). Settled in 2023.
Do the beneficiaries have to take any RMD’s or can they wait until the 10th year to empty the accounts.
Thank you
The IRA owner dies prior to reaching RMD age. Normally, the non-spousal beneficiaries are not required to take RMD’s, and have to clean out the account by year 10. Suppose one of beneficiaries reaches his RMD age (73) in the sixth year after inheriting the IRA. Does he have to start taking RMD’s from the inherited IRA when he reaches his own required beginning date?
No, he does not. However, the beneficiary might want to voluntarily take some distributions in years 1-9 to avoid a spike in their tax rate for a lump sum distribution in year 10.
Permalink Submitted by Alan - IRA critic on Thu, 2023-09-07 16:44
They are not required to take annual RMDs and can wait until year 10, however not taking any distributions until the end will result in a large taxable distribution in 2032 that will likely be taxed at higher marginal rates. Perhaps taking some voluntary distributions along the way will eliminate the higher marginal rate in 2032. Further, if the beneficiaries are still working and not maxing out their workplace plans, they could take inherited IRA distributions, while increasing contributions to their own plans. The additional deduction would offset the taxes on the inherited IRA distributions.
Permalink Submitted by David Berdow on Thu, 2023-09-07 17:17
Thank you Alan