Inherited IRA question

Submitted by Robert Roselli on Thu, 2021-02-18 13:44

I had a client pass away in October 2020. He was not required to take an RMD last year, I understand that part. His beneficiaries are his two children. By the time they engaged with me, I didn’t get their Inherited IRAs set up until January, The transfer of assets from their deceased father’s accounts to the two children’s accounts also happened in January.

So, I’m aware that the deceased parent was not required to take his RMD in 2020.
I’m also aware the two children aren’t required to take an RMD in 2021. Their accounts must be fully distributed by 12/31/2030.
My question is since the account wasn’t distributed until 2021, is an RMD required for the deceased RMD would have been in 2021 had he been living?



Submitted by Alan - IRA critic on Thu, 2021-02-18 14:27

There is no year of death RMD, since client passed in 2020. There is also no inherited IRA RMD due in 2021 since the 10 year rule applies. In other words, nothing is different than if the inherited IRA had been established in 2020.

Submitted by Robert Roselli on Thu, 2021-02-18 14:39

OK thanks. The confusing part for me was that the IRA stayed in the deceased name into 2021.  thought that since it stayed in his name in 2021, that the IRS would have required the children to take what would have been their father’s RMD in 2021 had he been alive. This is a unique situation that may not happen again or very often

Submitted by Alan - IRA critic on Thu, 2021-02-18 15:21

Maybe this was one of the reasons why the most prevelant inherited IRA titling format for many years included the owner’s DOD. I guess the IRS is not concerned about that anymore because their preferred title now just shows “John B as beneficiary of James B”. 

Submitted by David Mertz on Thu, 2021-02-18 19:33

By operation of law, the IRA became an inherited IRA upon the participant’s death whether or not it is moved to properly titled inherited IRAs.  Since father was not alive in 2021, there are no circumstances that would result in a 2021 RMD having to be made on father’s behalf.

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