Inherited IRA non-spousal beneficiary

Submitted by Eric Woodfill on Sun, 2013-08-25 22:54

I have a client (non-spousal) that inherited, his father was 55 and the beneficiary is 23. My understanding is that the client must start taking a distribution by Dec 31st of the year following the death of the IRA holder but are there different rules for a stretch IRA, such as the client must take a distribution during the year of death of the account owner in order to make it a stretch IRA?



Submitted by Alan - IRA critic on Mon, 2013-08-26 00:25

There are only one set of RMD rules, ie. all IRAs can be stretched by doing the same things. The client only needs to take his first RMD by 12/31 of the year following the year his father passed unless he elects the 5 year rule. Of course, electing the 5 year rule would destroy the stretch.

Submitted by Eric Woodfill on Mon, 2013-08-26 00:56

Thank you, I was told different and I wanted to double check.

Submitted by Peggy Fisher on Mon, 2013-08-26 15:41

For further clarification….A year-of-death RMD is not required if the Traditional IRA owner dies before his or her RBD or when a ROTH IRA owner dies – at any age.At age 55 the gentlemen died before his RBD.

Submitted by c k on Thu, 2013-08-29 20:27

Not too dissimilar circumstance:  Father died in the year he would have turned 86, but before his birthday, and so had already been taking RMDs.  In this case, the beneficiary of his IRA (along with his “regular” investment account) is a Trust.  Now the question is – is the correct RMD factor for 2012 (the year following death)….  (a) 6.7 (i.e. his age would have been 87 at the end of 2012)  or,  (b) 6.1 (the 2011 factor of 7.1 reduced by -1)  ???  Thank you!  

Submitted by Alan - IRA critic on Thu, 2013-08-29 21:51

  • Most IRA trust beneficiaries meet the requirements to be qualified for “look through” treatment. The RMD requirement would look through the trust to the age of the oldest beneficiary of the trust, and the RMD for 2012 would be based on the attained age of the beneficiary as of 12/31/2012. For subsequent years, that factor would be reduced by 1.0 each year.
  • If the trust was NOT qualified, the 2012 RMD would be based on the remaining life expectancy of the decedent had he lived. Decedent would have been 86 ( single life divisor 7.1) in 2011 and 87 in 2012. For 2012 the RMD divisor is 6.1, answer (b) of your post. This would also be the divisor in the unlikely event that the trust was qualified BUT the oldest trust beneficiary happened to be older than the decedent.

Submitted by c k on Fri, 2013-08-30 13:16

Alan – thank you! That helps clarify the issue.

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