Successor Beneficiaries
Hello,
First of all, I really appreciate the helpful information on your website!
I hope that you would be willing to give me a hand with a question regarding successor beneficiaries. The fact pattern is as follows:
Original IRA owner passed away in 2016 and had passed her RBD (she was 79).
Her brother was one of the beneficiaries who began taking RMDs the year following death.
He passed away in 2023 leaving his inherited IRA to his 3 children. He was 69 at his death.
I found the article “Successor Beneficiaries — “You Have Got To Be Kidding Me”” which was very helpful. Is my understanding correct that because the original IRA owner had passed her RBD, the children who inherit in 2023 must adhere to the 10 year rule AND satisfy RMDs within the 10 years? Further, the RMDs are based on their own single life expectancy, decremented by 1 each year?
Thank you,
Laura
Permalink Submitted by Alan - IRA critic on Wed, 2023-10-11 19:05
Yes, the successor beneficiary children will be subject to the 10 year rule and will also have to take annual beneficiary RMDs in years 1-9. However, the ages of the successor beneficiaries are immaterial. Their annual RMDs are a continuation of the RMD schedule of the original designated beneficiary with the annual divisor reduction of 1.0. Those divisors also had to be reset in 2022 to reflect the new RMD tables. Finally, the 3 successor beneficiaries must also complete the 2023 year of death RMD of the original beneficiary if he did not complete it before passing. They can complete that RMD in any combination among the 3 of them.
Permalink Submitted by Laura Davitt on Wed, 2023-10-11 19:17
Thank you for confirming how the successor beneficiary rules work. Also, thank you for clarifying that the divisor to be used is a continuation of the original inheritor. And yes, I will make sure that the beneficiaries satisfy his RMD for 2022.