Inherited IRA

Submitted by Jeff Kosoy on Tue, 2023-11-21 17:27

My father is 84 yrs old, he currently has a traditional IRA with Fidelity Investments and has been taking his rmds from the account for the past 10 years. His wife also 84 yrs old, is named primary beneficiary with 50% ownership, my adult sister and I are also listed as primary beneficiaries with each of us having 25% ownership as shown on Fidelity’s beneficiary designation form. Will each primary beneficiary listed on the account be able to inherit his IRA the same time after my father dies?
In other words, will my mother, sister,and I be able to split my father’s IRA into 3 separate inherited IRA’s at the time of his death?



Submitted by Alan - IRA critic on Tue, 2023-11-21 17:40

Yes. The deadline to establish separate inherited IRAs under which each designated beneficiary can take RMDs using their own single life expectancy is the end of the year following the year of death. If you and your sister establish your separate inherited IRAs prior to mother, then if mother is still living upon father’s death, she could elect to assume ownership of her inherited IRA and that is the preferable way for her to do this rather than doing a 60 day rollover to her own IRA. The beneficiaries that survive father can complete his year of death RMD in any combination if father did not complete the RMD before passing.

Submitted by Jeff Kosoy on Thu, 2023-11-23 18:35

To confirm calculating post-death inherited IRA RMDs: If my mother assumes ownership of her share, is she required to use the single life expectancy table for inherited IRAs or can she be permitted to combine the balance to her other IRA and use the Uniform Lifetime table when calculating her own RMD each year?I beleive it would be more benficial for her to use the larger factor under the uniform lifetime table in reducing her taxes each year.I also assume my sister and I will be subject to the 10-year rule for post-death RMDs because we both fall under the category of Noneligible designated Beneficiaries.    

Submitted by Alan - IRA critic on Thu, 2023-11-23 19:14

  • You are correct. Mother cannot assume ownership until you and sister have transferred out your shares into your own separate inherited IRA accounts because mother is not the sole beneficiary until that occurs. In any year after the year of death that mother assumes ownership, her RMD for that year will be based on the Uniform Table. However, if mother takes a distribution with the intent to do a 60 day rollover to her own IRA, that distribution will include a single life table beneficiary RMD that is not eligible for rollover. This is one reason why assumption of ownership is the preferred way to acquire ownership.
  • Children of the IRA owner who inherit any portion of the IRA will be 10 year rule beneficiaries unless they are chronically ill or disabled on the date of death. Since the decedent will be post RBD age, a single life table RMD in years 1-9 of the 10 year rule period will be required for each non spouse beneficiary. 

Submitted by Jeff Kosoy on Fri, 2023-11-24 16:53

Are there any ways to skip years 1-9 in taking our annual inherited IRA RMDs? My sister and I are in our 50’s. We would rather use this inheritance later in life or when it’s necessary.

Submitted by Alan - IRA critic on Fri, 2023-11-24 17:03

Due to the IRS delay in finalizing the Secure Act proposed Regs, the IRS has waived the penalty on 10 year rule beneficiaries for years 2021-2023. However, it is expected that the IRS will finalize the Regs early enough in 2024 and that annual beneficiary RMDs will be required in 2024 and beyond. Note that if you are in your 50s, these annual RMDs would be far less than the amount you would distribute to equalize the taxes in each of the 10 years, meaning that you would still have a much larger distribution to take in year 10. That may work out OK if you are retired in year 10.

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