MRD Calculation for Multiple Beneficiaries
My client is one of 8 brothers and sisters inheriting an IRA from their mother. Most have established separate inherited IRA accounts but one wants to take his distribution outright. Does this change the calculation of the life expectancies used for the inherited IRAs? Can each child use their own life expectancy or does the one outright distribution now require them all to use the life expectancy of the oldest beneficiary?
Permalink Submitted by mk foss on Tue, 2013-10-01 18:44
If the 8 individuals were named separately as beneficiaries – they each do their own thing once the inherited IRAs have been established. The only time that the actions of another affect the payout is when there is a trust beneficiary. Then the life expecancy of the oldest beneficary is used to determine RMDs. One sibling taking things early is not a factor.
Permalink Submitted by Jenn Quigley on Fri, 2013-10-04 18:52
Thank you, I appreciate your response, it was helpful.
Permalink Submitted by Alan - IRA critic on Tue, 2013-10-01 20:11
The key is for the individuals to create their own separate inherited IRA account prior to the end of the year following the year of death. For those that do this, they can use their own life expectancy for RMDs. For those that do not meet the deadline, they must use the age of the oldest of the group that did not create separate account for RMDs. While they can still create separate accounts after the deadline for convenience, since the deadline was missed those affected will be stuck with the age of the oldest of that group from that point forward. These comments assume that the year you were inquiring about was the first year of beneficiary RMDs, NOT the year of death if the decedent did not complete the year of death RMDs.
Permalink Submitted by Jenn Quigley on Fri, 2013-10-04 18:54
Luckily all accounts have been established before 12/31 of the year after death. I appreciate your confirmation that all beneficiaries can use their own life expectancy.