No designated bene of IRA

Submitted by MIKE KRUCHTEN on Fri, 2017-12-15 23:25

I understand if IRA owner is taking RMD’s and passes leaving no bene’s or maybe his estate the IRA must be paid out using IRA owner’s age and reduce by 1 for each subsequent year.

In 2017, IRA owner was 75 and had a single life factor of 22.9. What figure is used in 2018, is it 21.9 or is IRS Table I used which would be 12.7 then 11.7 in 2019??



Submitted by Alan - IRA critic on Sat, 2017-12-16 00:45

  • Actually, neither. When the owner’s age is being used to calculate RMDs, the Table I divisor in the year of death  (age 75 is 13.4) is the starting point for the 1.0 reduction in the first beneficiary RMD year of 2018. The 2018 beneficiary divisor is therefore 12.4, then 11.4 for 2019 etc. The rule is then when using a designated beneficiary’s age for RMDs use the age in the year following the year of death. But when the owner’s age is used, it is the age at the end of the year of death less 1.0 for the first beneficiary RMD year.
  • Also, note that the IRA agreement should always be checked to determine the default beneficiary provisions. There are still a few IRA agreements that specify the surviving spouse as beneficiary if there is no beneficiary listed, or if there is no surviving spouse, children of the decedent. If the IRA agreement contains such a provisions, those default beneficiaries are treated as designated beneficiaries even though the decedent did not specifically name them. 
  • But usually, the decedent’s estate will be the default beneficiary. In that case, the executor can assign the inherited IRA to the estate beneficiaries so that each can continue an inherited IRA, but their RMD divisors will continue to be based on the age of the decedent. This will provide a limited stretch, but still will usually be longer than the 5 year rule, which would apply to an estate beneficiary if death was prior to the RBD.

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