Inherited 401(k) & IRA Year of Death RMD
Client passed away this year (May 2021) at the age of 71. He would have turned age 72 this month (Nov 2021). He was actively participating in a 401(k) when he died. Decedent also had an IRA. His son (age 34) was the only beneficiary of the 401(k) and the IRA. The 401(k) and IRA were both rolled over to the son’s inherited IRA in July. An RMD was not taken from the 401(k) prior to rollover and no year of death RMD has yet been taken from the IRA.
What is the son’s course of action for the decedent’s year of death RMD considering there is inherited money from his dad’s 401(k) and IRA in the same inherited IRA? Thank you.
Permalink Submitted by Alan - IRA critic on Thu, 2021-11-04 17:11
Client was born in late 1949, so his RBD would be 4/1/2022 even if he was not still working for the 401k provider. Since he passed prior to his RBD for both plans, there is no year of death RMD requirement. Per the Secure Act, the son will be subject to the 10 year rule (unless disabled), so will have no annual RMDs, but must drain the inherited IRA by 12/31/2031. To avoid the possible higher taxes of a large distribution at the end of the 10 year rule period, he may want to take voluntary annual distributions including this year, but there are no actual RMDs unless there is still a balance in 2031 requiring full distribution.