Inherited IRA RMD or No?
Hello –
I’m sure this question has been asked, so I apologize but there is not an easy way to search this forum for similar questions. If there is, perhaps you can let me know how to do it to avoided asking duplicate questions.
Mrs. Client died in 2022 at age 71. The IRA beneficiary is her sister (age 73 in 2022). Since Mrs. Client died prior to her RBD and since her sister is an eligible designated beneficiary (within 10 years of decedent), it seems to me that the beneficiary is NOT required to take annual RMD’s, but must still liquidate the entire IRA in the 10th year after death. Is this correct? If not…what is the correct answer.
Many thanks.
Permalink Submitted by Alan - IRA critic on Mon, 2023-12-11 19:12
No, an EDB must take annual RMDs and is not subject to the 10 year rule. While rarely beneficial, because this owner passed prior to RBD, the sister does have the option to elect out of EDB treatment and into the 10 year rule. The deadline to make this election is 12/31/2023. However, while this election would erase annual RMDs, the 10 year rule would require full distribution by 12/31/2032. Unless the beneficiary has some unusual income pattern or health problem, this election would reduce the number of years to drain the account by about 50% (about 20 years to 10 years). With EDB treatment, the annual RMDs will drain the account at a roughly equal rate in each year and therefore spread the tax impact.