Inherited IRA
Parents died with no beneficiaries on IRA accounts. The two children filed small estate declarations with brokerage firm to get the IRA funds retitled into their names. Can the two children, now beneficiaries able to treat these as inherited IRA accounts and stretch out the distributions for life?
Permalink Submitted by Alan - IRA critic on Sun, 2017-02-19 22:07
Did each parent pass and leave an IRA to their estate? For each that did, did they pass before or after their required beginning date? Another possibility is that one of the IRAs was already inherited by one parent from the other?
Permalink Submitted by Marina Ferrone on Wed, 2017-02-22 01:17
Here are some more facts: Mother died in 2012 with husband as beneficiary. He refused to take the assets into his name for fear of taxation even when told it would not apply. Husband died last year with no beneficiaries listed. Both were after RBD.
Permalink Submitted by Alan - IRA critic on Wed, 2017-02-22 02:06
If husband failed to take out the full beneficiary RMD for any of those years, he became the default owner of the inherited IRA. And as such if he did not take out his ownership RMD for 2016 before passing, either his estate or the beneficiaries of his estate must complete the 2016 RMD. If his inherited IRA is assigned to the estate beneficiaries, they must take RMDs using his remaining single life expectancy for their RMDs starting in 2017. They would use the divisor for the age he would have been at the end of 2016 and reduce that divisor by 1.0 for the 2017 beneficiary RMD. The IRA that had always been his is treated in the same manner. It if can be determined that he completed beneficiary RMDs on mother’s IRA each year, that would change the RMDs on that account.
Permalink Submitted by Marina Ferrone on Wed, 2017-02-22 19:29
So the two children beneficiaries cannot stretch their distributions over their own lives for either IRA? They have to follow the dad’s RMD numbers forever?
Permalink Submitted by Alan - IRA critic on Wed, 2017-02-22 20:12
Yes, you cannot inherit through the estate and be a designated beneficiary. They would have had to be named specifically as the IRA beneficiaries or inherited from a qualified trust in order to avoid being limited to Dad’s remaining much shorter life expectancy.