inherited IRA

Submitted by Thomas Ferry on Thu, 2020-05-14 18:17

case
-mom and dad die in their 70s in 2016,
-they have 4 adult children (one of which (J) is special needs),
-assets are divided in 4, and J’s inheritance is left to special needs trust for J. SNT says that if J dies, benef is J’s wife (A, who is also blind), then J and A’s children. If no wife and no children, then proceeds from SNT are for J’s 3 siblings.
-IRA and indiv acct are in the special needs trust for Jphn.
-J and A have no children
-J dies in 2020
-assets remain in the SNT for wife A who is blind
-Does A have to take an RMD in 2020?
-When is the soonest that A has to take an RMD, and over what period of time?
-Should A die, over what period of time do the 3 siblings of J have to take RMDs from the IRA?



Submitted by Alan - IRA critic on Thu, 2020-05-14 21:40

  • Since all 2020 RMDs are waived by the CARES Act, the first question is easy. No 2020 year of death RMD.
  • Assuming that the SNT is qualified for look through and was named on parent’s IRA as a beneficiary, and a separate inherited IRA was established by 12/31/2017, J should have been taking LE RMDs through 2019. Under the Secure Act, the 10 year rule would appear apply after J’s death with A being simply a successor beneficiary despite being disabled. A would not have annual RMDs but the IRA would have to be fully distributed by 12/31/2030. However, this could change once the IRS issues Regs.
  • If A passes before the 10 year rule is complete, the siblings are also subject to A’s 10 year rule, and would have only until 12/31/2030 to drain the IRA.

Submitted by Bruce Steiner on Sat, 2020-05-23 15:10

  • J’s share was in trust rather than outright.  Assuming it’s a discretionary (accumulation) trust, which is almost certainly the case here since J has special needs, it’s not clear whether the 10-year rule is triggered by the death of the current beneficiary, the primary beneficiary if there is more than one current beneficiary, the oldest beneficiary, the first beneficiary to die, the last beneficiary who was living at the IRA owner’s death, etc.
  • Bruce Steiner

Add new comment

Log in or register to post comments