Inherited IRA and Life Expectancy
I am the beneficiary of a Trust which owns an inherited IRA. The annual distributions to me from the IRA are calculated based on life expectancy.
I am planning to move the IRA out of the trust and avoid income taxes by rolling it over to an new inherited IRA outside the trust. My question is: What life expectancy do I use for the annual distribution calculation for the new Inherited IRA? The one used for distributions from the original IRA or a new expectancy based on my current age?
Thanks
Permalink Submitted by Alan Spross on Mon, 2011-12-19 18:52
Are you also the trustee of the trust? If the trust allows the trustee to distribute assets from the trust, the inherited IRA could be assigned to you, but it will not change the way RMDs are calculated. The intial divisor used for your RMD in the year after the death of the IRA owner is reduced by 1.0 each successive year and that would continue whether the IRA is assigned directly to you or not.
Your individual tax rates are lower than the rates for the trust, but was the trust paying the income taxes or were the RMDs distributed out of the trust to you annually, reported on a K1 and taxed at your rate?