Successor Beneficiaries of pre-SECURE Act Designated Beneficiaries - Roth Conversions?

Submitted by Max Filbeck on Thu, 2021-02-11 17:40

Hi all,

Client A is married to client B. Client A inherited an IRA pre-SECURE Act then passed away in 2020 with Client B (their spouse) named the beneficiary of the inherited IRA. This would make client B the successor beneficiary of a pre-SECURE Act Designated Beneficiary.

My question is what options does client B have for the now twice inherited IRA? I believe it is still subject to the new 10-year rule but would like to confirm this.

Also, does client B have the opportunity to conduct Roth conversions with the inherited IRA?

Thanks!

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Permalink Submitted by Alan - IRA critic on Thu, 2021-02-11 18:07

You are correct. The 10 year rule would apply to this successor beneficiary of a pre Secure inherited IRA. No inherited IRA can be converted, nor can it be rolled over. It can only be moved to another custodian by direct transfer.
It appears that the Secure Act wording suggests that if client A, being the designated beneficiary had passed prior to 2020 resulting in the IRA being twice inherited pre Secure, then Client B would not be subject to the 10 year rule. Instead, B would be required to complete the remaining RMD schedule of A as would have been the case pre Secure.