Inherited IRA – post Secure

Submitted by ShipsnGiggles on Sun, 2020-03-15 23:49

T-IRA owner died in 2020
Primary beneficiary’s 50% charity / 50% adult healthy son
Under pre-secure rules – The son could stretch based off his life expectancy so long as the charity was removed as a beneficiary by September 30 Of the year following year of death. If not the son was then subject to the five-year payroll

Question
Post secure -it seems straightforward if the charity is removed as a beneficiary by September 30 the healthy adult son will be subject to the new 10 year rule

What happens if the charity remains a beneficiary on September 30 the following year?

Is the son now subject to the five-year payout?



Submitted by Alan - IRA critic on Mon, 2020-03-16 02:24

No. The separate account rules still apply for the son. That means if the son does a direct transfer to an inherited IRA by 12/31 of the second year, they will be subject to the 10 year rule.  Look at this as a 3 month extension for the son to avoid the 5 year rule if the owner passed prior to the RBD.

Submitted by ShipsnGiggles on Mon, 2020-03-16 12:22

12/31 following the year of death (i.e.2021) – would the son than be subject to the 5 yeat payout? Thank you

Submitted by Alan - IRA critic on Mon, 2020-03-16 15:36

No, 10 year rule. However, if the decedent passed after the RBD and the son did NOT establish the inherited IRA by the deadline, then the son would be treated as a non designated beneficiary resulting in use of the remaining life expectancy of the decedent. That would be longer than 10 years if the decedent passed between 73 and around 80, but less if the decedent was older than 80. Accordingly, in some cases the son might be better off to wait until after the deadline to establish the separate account. So far, there has been limited analysis of mixed beneficiary situations like this. The IRS will have to issue regulations to address these questions.

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