Beneficiary IRA – Qualified Beneficiary

Submitted by Matthew Santarsiero on Thu, 2020-11-05 23:53

Good afternoon!

Kudos to the slott team – thank you for all your help! I recently sat in on the Roth Conversion webinar. Is there a link for the powerpoint that was shared. Very useful information on there!

I have a client that is inheriting a 401(k) from her sister. So she’ll be a non-spouse beneficiary with a Bene Trad. IRA. Her sister passed this year (after 12/31/20) which would ordinarily remove the “stretch.”

If the beneficiary is disabled at 70% (not sure what that means) and receives social security disability – is she a qualified beneficiary to “stretch” her IRA?

Thanks,
Matt



Submitted by Alan - IRA critic on Fri, 2020-11-06 02:00

  • Sorry, do not have access to the powerpoint.
  • Receiving SSD likely means client is qualified as an EDB (eligible designated beneficiary) and can still use her single life expectancy (the stretch) for her beneficiary RMDs. A % of disability is not an acceptable measurement but a letter from her MD that she qualifies as disabled under Sec 72(m)(7) of the tax code would serve as  official disability documentation. 
  • Separately, she would also qualify for the stretch if she is not more than 10 years younger than her sister.
  • I assume you meant that sister passed after 12/31/2019. She should be sure to complete a direct rollover to either an inherited TIRA or inherited Roth IRA no later 12/31/2021 especially if sister passed prior to her RBD. Otherwise, she could be subject to the 5 year rule if the plan requires it. Completing the rollover by that deadline eliminates any plan restrictive RMD provision. 

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