If named IRA beneficiaries have died, no contingent beneficiaries were named, IRA account falls to the Estate (no living Trust)
IRA owner dies December 2022, RMD for 2022 was taken. Named beneficiaries have already passed. No contingent beneficiaries were named. IRA will then fall to the Estate (no Living Trust only a Will) with the Estate showing named beneficiaries. Can the estate distribute the IRA to the named beneficiaries of the Will and allow each to withdraw over 10 years? Would distributions would be based on the RMD table in place for the decedent at the time of his death? (he was 97) for all the beneficiaries with the understanding that by 12/31/2032 the entire account must be distributed?
Does the original paperwork of the IRA custodian determine if the Estate will be able to distribute the IRA to the beneficiaries of the Will or is that automatic under IRS rules that the estate is allowed to have the beneficiaries establish inherited IRA’s and take advantage of the 10-year rule?
If the beneficiaries must use the life expectancy of the decedent, who was 97 at the time of death, and subtract 1 each year, the distribution of the entire account would be completed within 3.4 years (based on Table 1 in IRS Pub 590-B) so they really won’t get the benefit of a 10-year payout.
Please help clarify the options the Executor has with regard to the IRA. Thank you.
Permalink Submitted by Alan - IRA critic on Sun, 2023-11-05 01:53
The RMD distribution period is based on the decedent’s LE, but being 97 the inherited IRA must be fully distributed in 2025 with the bulk of it in 2023 and 2024. The 2023 divisor is 2.4 because the initial divisor spins off of the decedent’s age in 2022, 2024 divisor is 1.4 and the 2025 divisor is .4. The 10 year rule does not apply whether the executor is able to assign the inherited IRA out of the estate or not. Most custodians will cooperate with an assignment request from the executor, but a few will not. If this custodian does not, the inherited IRA might be transferred to another custodian that will cooperate, thereby allowing the executor to close the estate without having to take a lump sum distribution.