Charity as partial IRA beneficiary
Client named 5 beneficiaries, one of whom was a charity. The representative of the charity failed to take a distribution by Sept 30 of the year after death but the human beneficiaries established separate accounts by Dec 31 of the year after death. Are the human beneficiaries all subject to 5 years now (it was a pre RBD death).
Permalink Submitted by Alan - IRA critic on Wed, 2021-11-10 03:14
The establishment of separate inherited IRA accounts by the individual beneficiaries by the deadline likely allows those beneficiaries to determine RMDs using their individual LE. Of course, for post Secure Act deaths, these beneficiaries might be subject to the 10 year rule nonetheless, but EDBs establishing separate accounts can still use LE RMDs.
There has always been a question whether the separate account rules per IRS Reg 1.401(a)(9)-8 Q 2 applies when there is a non individual beneficiary (charity) included or whether ALL beneficiaries must establish separate accounts. This Reg does not state that ALL beneficiaries must create separate accounts, but in this case the charity was left as the only remaining beneficiary and accordingly was in a separate account by year end as well. These questions have likely not been clarified by the IRS since their enforcement of inherited IRA RMDs is non existant. Therefore, the 5 separate account beneficiaries should take the aggressive position of disregarding the charity.