Inheriting an Inherited IRA
If my brother died at age 67 leaving his IRA to our mother (age 95). Once mom dies are there any special distribution rules or do they still simply follow the non-spouse inherited IRA rules whereby I can either use my own life expectancy from the Single Life Table (subtracting 1 each year), or use my mothers life expectancy from the single life table (subtracting 1 each year)? Is there something unique about inheriting an inherited IRA that I am missing?
Permalink Submitted by Alan - IRA critic on Tue, 2019-11-19 14:44
You must continue the RMD schedule your mother was using because you would be a successor beneficiary. She is the designated beneficiary. Your brother’s age would apply only if he passed after his required beginning date for RMDs. If he passes prior to that age, his age cannot be used for your mother’s RMDs, only her age. Being 96 in the year after his death, the stretch period for her (and you when she passes) is only 3.8 years. Perhaps your brother should either name you as beneficiary or as contingent beneficiary. The latter would require mother to disclaim the IRA unless she pre deceases your brother. You would then be treated as the designated beneficiary and your own age would determine your beneficiary RMDs.
Permalink Submitted by Norman Cook on Tue, 2019-11-19 15:06
I do not understand “brother’s age would apply only if he passed after his required beginning date for RMDs. If he passes prior to that age, his age cannot be used for your mother’s RMDs, only her age” I thought that As a non-spouse beneficiary, you must directly roll over the inherited assets to an Inherited IRA in your own name and use your own age and the IRS Single Life Expectancy Table for calculating the first year RMD. For each year after, you would subtract one year from the initial life expectancy factor.Why is the brother’s age important?
Permalink Submitted by Alan - IRA critic on Tue, 2019-11-19 15:21
Because there is a provision described on p 9 of Pub 590 B that when the IRA owner passes ON or AFTER his required beginning date, the life expectancy for beneficiary RMDs is the longer of the beneficiary’s single life expectancy per Table I OR the owner’s remaining life expectancy. Since most beneficiaries are younger than the younger, the owner’s age is rarely used. However, in your example the beneficiary is much older than your brother, therefore using your brother’s remaining life expectancy from Table I reduced by 1.0 each year would reduce the beneficiary RMDs. Again, your brother’s age only applies to his beneficiary if your brother lived until his RBD (4/1 of the year after the year he reaches 70.5) and his beneficiary is older than he is. Apparently, Congress felt that it was unfair to older beneficiaries for them to be forced to take larger RMDs than the owner who had already begun RMDs using his age. The 1.0 reduction in divisor applies regardless of whose age is used for non spouse beneficiaries.