Does an EDB have a choice of RMD distribution Methods?

Submitted by Paul McGillivray on Thu, 2021-07-15 12:26

Could a eligible designated beneficiary use the 10-year distribution rule instead of the life expectancy RMD path? Situation is a deceased age 75 leaves his substantial IRA to his sister who is 77. Her RMDs rates under the inherited table are close to 10% and increase annually as you know. She wants to buy an annuity but no carrier will offer one with such a high rate of distribution. If this EDB sister can choose not to be an EDB but just a 10-year Rule beneficiary, our problems are solved. What do you think? PGM

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Permalink Submitted by Alan - IRA critic on Thu, 2021-07-15 16:45

Latest IRS swipe at Pub 590 B indicates that an EDB can only opt for the 10 year rule if the plan owner passed prior to RBD. At 77, the decedent passed after the RBD and the EDB would not have the option to opt out of LE RMDs. Insurance companies have long been reluctant to offer an annuity (to be annuitized) to beneficiaries if the plan owner did not purchase one. This might be attributed to the highly complex RMD restrictions in IRS Reg. 1.401(a)(9)-6 written to eliminate the chance of an annuity extending the beneficiary distribution period.