Mother inherits son’s qualified plan
Mrs. A, 84 years old, inherited two qualified plans from her son, both administered by the state of Ohio. He died in 2021 and was 50 years old. The state (Ohio) distributed the plan assets to two accounts in Mrs. A’s name, one called “beneficiary” (“Ohio 457” when son owned it) and one called “401(a) rollover” (same name as when son owned it). Current accounts are in Mrs. A’s name.
The state told Mrs. A that she must distribute the funds within 5 years,
What are Mrs. A’s options?
As a Designated Non-Eligible Beneficiary, doesn’t she have 10 years to distribute the accounts?
Can she roll over the accounts to an Inherited IRA and use the son’s life expectancy to compute RMDs?
(The transfer to her name was made recently, perhaps it could be reversed.)
Mrs. A was not consulted before the transfers to her name were made. What are the implications of this?
Permalink Submitted by Alan - IRA critic on Tue, 2021-08-24 13:26
The Secure Act does not go into effect until 2022 for govt plans. Since he passed prior to 2022, Secure and the 10 year rule do not apply. If these plans had the 5 year rule as default for deaths prior to RBD, that can be avoided by doing a direct rollover to an inherited IRA no later than 12/31/2022. If the inherited IRA is set up and the balances transferred this year, the first beneficiary RMD for 2022 will be determined using the new RMD tables and Mrs A’s age. If she will be 84 on her birthday this year, the 8.7 new table divisor reduced by 1.0 for 2022 to 7.7 will be her 2022 divisor, and after 2022 will be reduced by 1.0 each year. So effectively a stretch of 7.7 years. But she could also stick with the 5 year rule if she wants to control the amount distributed in each year 2022-2026, which she could do with an inherited IRA as well. No reason that a single inherited IRA could not receive direct rollovers from each plan.