Inherited IRA

Submitted by Gregory Kozerski on Wed, 2020-12-02 19:04

If the owner of an Inherited IRA passes away before the account is depleted and names a successor beneficiary (in this case their spouse) are RMD’s just continued on based on what the deceased owner was taking?

How would the account be titled?



Submitted by Alan - IRA critic on Wed, 2020-12-02 19:48

  • If the owner passed prior to 2020, and the beneficiary passes after 2019, the Secure Act requires that the 10 year rule be applied to the successor beneficiary, starting in the year following the year of death of the designated beneficiary.  The spousal rollover is not allowed here since the IRA was originally a non spouse inherited IRA. 
  • However, if both the owner and the designated non spouse beneficiary passed prior to 2020, the wording in the Secure Act seems to indicate that the successor beneficiary could complete the RMD schedule of the original designated beneficiary. The correct divisor for the designated beneficiary would continue to be reduced by 1.0 for each including 2020 when all RMDs are waived.
  • The successor beneficiary’s IRA should generally show the name of the successor “as beneficiary of (first beneficiary)”. The owner’s name would drop off. However, if the IRA custodian uses some other format, it will likely be OK. The IRS knows that some processing platform are not set up to allow the preferred title format for IRAs that have been inherited more than once.

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