Inheriting an Inherited IRA/ End of stretch capabilities
We have a situation where two sons are listed as beneficiaries on an inherited IRA. The IRA started at their uncles death where the brother (Father of two sons) was named as the beneficiary. This brother passed on and IRA transferred to his wife ( the mother of sons). She recently passed on. So we are now at the stage where we had a beneficiary IRA become an inherited IRA and now becoming a second inherited IRA. Do the assets have to be dispersed out at this stage or do we have the capability of continuing with an additional inherited IRA? Thanks Pat
Permalink Submitted by Alan - IRA critic on Tue, 2019-05-07 15:44
The RMD schedule of the original beneficiary (brother) continues regardless of how many successor beneficiaries inherit the account. Therefore, the correct divisor should be reduced by 1.0 for each successive year. The balance will be drained in the same year that brother would have drained it, but distributions in excess of the RMD will of course reduce all later RMD amounts. When each successive beneficiary inherits, they are responsible for completing the year of death RMD from the prior beneficiary if they did not complete it, but beneficiaries do not have to worry about prior RMD deficiencies. Finally, in a case like this rather than simply determining the prior year RMD divisor and reduce it by 1.0, it may be beneficial to actually determine if those divisors were correct. In this case, all that is needed is the brother’s age in the year following uncle’s death. The divisor for that year comes from Table I and the 2 sons would then determine their starting divisor by reducing the brother’s first divisor by 1.0 each year.