inheriting sister’s SEP IRA
My client age 54 is the beneficiary of her sister’s (age 57) SEP-IRA. Date of death was May 9, 2009. The account is just now being transferred to my client, the beneficiary. Should the account I set up be titled an “inherited SEP with the deceased sister’s name” or “inherited IRA with the deceased sister’s name”. Does the releasing custodian make a minimum distribution before transferring the funds to the beneficiary sister for 2009? How are required distributions calculated each year going forward for the surviving sister? What else do I need to know? Thank you.
Permalink Submitted by Alan Spross on Mon, 2010-08-09 20:26
She does not have to show the type of IRA in the registration, but she does need to show both her name and the name of her sister, eg “client’s name as beneficiary of (sister) ” . A SEP is just a form of traditional IRA, but when it is payout mode as a beneficiary account, it is no longer a SEP IRA, just a TIRA. The new custodian may have system dictated preferences in the titling of a beneficiary IRA, eg the order in which the two names are listed.
There was no RMD required in 2009, as they were waived by Congress, but that is immaterial since the sister passed prior to her RBD. Client’s first RMD would be for 2010 and must be distributed by year end 2010, so there is no requirement to hold the RMD from the transfer. Once the new custodian has set up the beneficiary IRA account (BDA), client should be sure that her successor beneficiary is designated on the IRA. Her 2010 RMD will be based on the 12/31/09 account balance and the divisor is from Table I using client’s age attained as of year end 2010. For each year thereafter, the divisor is reduced by 1.0. The age 54 divisor is 30.5 so the IRA will be drawn down over 30.5 years maximum.