Inherited IRA RMD Calculation
Client (Paul) father’s second wife, Lynn, was born in 1952 and died in 2015 (at age 63), leaving Paul’s father as the IRA beneficiary.
Paul’s father was born in 1944 and elected to receive the IRA as a beneficiary (he did not roll it into his own IRA), resulting in the ability to delay having to take RMDs until Lynn would have had to. As such, no RMDs were ever taken from the account.
Paul was born in 1966.
Paul’s father (again, born in 1944) died on 2/6/2019 (at age 75), naming Paul as the IRA beneficiary.
Paul did not take an RMD in 2020 as they were waived.
As a beneficiary, Paul needs to utilize the Single Life Expectancy table to determine his RMD, but what year/age determines the age he should use:
(a) 2016 as the year after Lynn’s year of death (Paul attaining age 50 | N=34.2) or
(b) 2020 as the year after Paul’s dads year of death (Paul attaining age 54 | N=30.5)?
If (a) above, then Paul’s 2021 RMD divisor would be 29.2 (34.2 – 5) and
if (b) above, then Paul’s 2021 RMD divisor would be 29.5 (30.5 – 1), correct?
Permalink Submitted by Alan - IRA critic on Fri, 2021-01-15 18:37
Per IRS Reg 1.401(a)(9)-3 QA 5, in cases where the surviving spouse passes prior to the date where beneficiary RMDs are to begin for the surviving spouse (Paul’s father), the surviving spouse is treated as the plan owner for purposes of RMD determination for his beneficiaries. Therefore, Paul is treated as the designated beneficiary of Paul’s father rather than as a successor beneficiary, and the answers are b) and his 2021 divisor is 29.5.
If his father had passed one year later, instead of stretching 29.5 years Paul would have been subject to the 10 year rule.