Secure Act Question

Submitted by Kevin O'Hearn on Thu, 2020-11-12 16:33

Hello,

I have a case were the original decedent is 77 years old and passed away in 2020. The primary beneficiary is non-spouse and 82 years old.

Would this individual be considered an “Eligible Designated Beneficiary?” Technically this person is not more than 10 years younger than the original decedent.

Any thoughts would be greatly appreciated.

Thank you.



Submitted by Alan - IRA critic on Thu, 2020-11-12 16:58

Yes, the beneficiary is an EDB, and can use the single life table to figure their RMDs starting in 2021. The 10 year rule does not apply. Moreover, since the owner passed after their RBD the age of the decedent can be used instead of the age of the older beneficiary. The divisor for the age that the decedent would have attained in 2020 is reduced by 1.0 to determine the beneficiary RMD for 2021. Then for 2022 the divisor will need to be reset to reflect the new RMD tables first effective in 2022. The reset is done by using the new table to determine what the initial divisor using the above method would have been. Then 2.0 is subtracted from that divisor to determine the 2022 beneficiary RMD. After 2022 continue to reduce the divisor by 1.0 for each year.To

Submitted by Wendy Mommaerts on Fri, 2020-11-13 15:41

Just to clarify things, can you confirm or correct the following scenerios.Scenerio 1: Our clients father passed away 10/1/2020. Daughter is definately more than 10 years younger than her father so she will need to deplete the inherited IRA by 12/31/2030?Scenerio 2: If this man passed away on 10/1/2020 leaving his IRA to a non-spouse beneficiary that is NOT more than 10 years younger. the beneficiary would then be able to follow the single life table and decrease by 1 each year after?Scenerio 3: client passed away 10/1/2020 at age of 57, leaving his IRA to his spouse. Spouse keeping the funds in an inherited IRA and will begin taking RMDs the year the deceased would have turned 72 OR move the funds into her own IRA prior to the year the deceased would have turned 72? 

Submitted by Alan - IRA critic on Fri, 2020-11-13 16:00

  1. Yes, her inherited IRA must be drained by 12/31/2030. No annual RMDs will be due.
  2. Also correct. Annual RMDs due in this case. If this beneficiary happened to be older than the decedent, the remaining LE of the decedent could be used instead of that of the beneficiary.
  3. Correct. The rules here were not changed by the Secure Act. Surviving spouse might keep the IRA as inherited until the spouse reached 59.5. Spouse could assume ownership at anytime, keeping in mind the year the deceased spouse would have reached 72 and also the year the surviving spouse would reach 72, and also that if ownership is assumed before 59.5, any distribution prior to 59.5 would be subject to penalty.

Submitted by Wendy Mommaerts on Fri, 2020-11-13 16:09

I just came upon this scenerio…brother died 5/1/2020 age of 82 leaving his IRA to his sister who is 68. Sister will now need to deplete the IRA by 12/31/2020?

Submitted by Alan - IRA critic on Fri, 2020-11-13 17:28

Yes, since she is more than 10 years younger. The 10 year rule will apply.

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