Beneficiaries of A Bene IRA question
Here is a scenario. The question is “Do the beneficiaries have the ability to CONTINUE to stretch the IRA RMDs? and if so how? Basically, what are the options of the benes
Scenario:
70 year old woman inherited the IRA of her 75 year old (non married) brother. She currently has a “non spousal bene IRA”, from which she takes an RMD yearly.
70 year old woman has now named her children, (in mid 40’s), as the beneficiaries. At the time of her death , what are the options that the benes (her children) will have? What must they do re IRA? RMD? other?
Thanks
Permalink Submitted by tomd37 on Wed, 2014-10-01 00:07
Her beneficiaries can continue the RMD, however, if done, it must be done using the same factor she was using at the time of her passing, reduced by an amount of 1.0 succeeding year. In essence her beneficiaries cannot establish their own factor. Tom D.
Permalink Submitted by Mark Fletcher on Wed, 2014-10-01 00:26
Thank Tom. Will the new IRA be titledChild, beneficiary of 70 year woman?ORChild, beneficiary of 75 yr man? I hope you get what I am trying to convey. Thx
Permalink Submitted by tomd37 on Wed, 2014-10-01 01:05
Yes, I understand what you are asking, but I am not positive of the answer. Let’s see if Alan S responds or someone else who knows the absolute answer. Tom D.
Permalink Submitted by Alan - IRA critic on Wed, 2014-10-01 02:19
If the children (successor beneficiaries) inherit, they should have the IRA titled showing themselves as beneficiaries of the 70 year old woman. The name of the original owner (75 year old) should be deleted. The successor beneficiary will be continuing the RMD schedule of the original beneficiary as they cannot use their own life expectancies.
Permalink Submitted by Mark Fletcher on Wed, 2014-10-01 13:05
Got it. Thanks so much Tom and Alan
Permalink Submitted by David Schlossberg on Mon, 2021-08-02 17:09
How does this change post Secure Act. In 2017, a 70 inherited a 75 year old spouse IRA and is keeping it as a bene IRA. Named her two kids as beneficiary in their 40’s. It would apepar better to transfer to her own, but curious the impact all around eaving it as is?
Permalink Submitted by Alan - IRA critic on Mon, 2021-08-02 17:45
The only possible benefits for a surviving spouse maintaining the IRA in inherited status are avoiding an early distribution penalty and reducing RMDs. Neither applies in this case. The beneficiary is over 59.5, so there would be no early distribution penalty for distributions from an owned IRA, and beneficiary RMDs begin the year after death in this case, but not until 72 for an owned IRA. And owned IRA RMDs are much lower than beneficiary RMDs. Therefore, she should assume ownership of the inherited IRA without delay. Either way, upon her death the children will be subject to the 10 year rule unless they are disabled or chronically ill.