10 Year Rule or Remaining Single Life Expectancy
If the beneficiary of an IRA is an entity, charity, or non-qualifying trust, and the owner was still living by April 1 of the year in which the account holder reached age 72, can the distributions be based on the remaining Single Life Expectancy of the IRA owner? If the owner was younger than 72, must the assets be completely distributed by December 31 of the 5th year containing the anniversary of the IRA owner’s death? If a beneficiary is in fact permitted to take RMDs over the owner’s remaining single life expectancy, isn’t that better than being forced to take RMDs over 10 years?? That seems strange to me.
What would the answers be if the beneficiary was a Qualifying Trust?
Thank you!
Permalink Submitted by Alan - IRA critic on Thu, 2021-01-07 18:30
Since entities have no life expectancy, the only option for deaths after the RBD is the remaining LE of the decedent, and for deaths prior to the RBD the 5 year rule will continue to apply. Secure does not change these rules for non designated beneficiaries. But Secure does change the RMDs for designated beneficiaries which include qualifying trusts. This creates the question whether an otherwise qualified trust should forfeit qualification by not submitting the trust info to the IRA custodian by the 10/31 deadline when IRA owner passed after the RBD. By doing so, the remaining LE of the decedent will apply and that could well be longer than 10 years a qualified trust would be limited to if the trust beneficiaries were not EDBs. For this to work, the decedent’s age at death would have to be between 73 and 80 (73 and 81 under the new 2022 tables). That said, use of decedent’s age requires rigid annual RMDs contrasted to the flexibility of the 10 year rule, so this intentionally created non qualified trust would likely only be worthwhile for the narrow window of ages73-78 at death.