Beneficiary IRA RMD Question
I’m in a disagreement with a custodian about this: 77 year old dies in 2014, leaving her TIRA to her sister. Sister receives assets in a new Bene IRA, and begins taking RMDs as necessary each year. In 2020, beneficiary turns 86. I don’t think the custodian is using the correct factor. They are using a facto of 5.10. Using Table I (Single Life Expectancy) (for use by beneficiaries), for an 86 year old shows a factor of 7.1. The custodian says the table I am using is to be used only by spousal beneficiaries. I’m confused. Who is correct?
Permalink Submitted by David Mertz on Mon, 2021-11-29 17:08
[Edit: See follow-up replies below. The calculations in this post assumed that the beneficiary was younger than the decedent, which is not the case.]
Neither. If the beneficiary turned age 86 in 2020, in 2015 the beneficiary turned age 81. The LE factor for age 81 in 2015 was therefore 9.7. Reduce that by 1 for each of the following years and the divisor for 2020 would have been 4.7 and for 2021 would be 3.7.
If the participant actually died in 2015, in 2016 the beneficiary would have turned 82 making the LE factor for 2016 be 9.1, the divisor for 2020 be 5.1 and the divisor for 2021 be 4.1. That would agree with the custodian’s calculation.
If the year of death was truly 2014, that might mean that the RMDs have not been fully satisfied each year.
Because the Single Life Expectancy table changes for 2022, the beneficiary’s LE factor for the year following year of the participant’s death will need to be redetermined and then reduced by the number of years that follow (increasing the factor over what it would have been with the old table).
Note that RMDs were waived for 2020, but that doesn’t change the calculation for 2021.
Permalink Submitted by Alan - IRA critic on Mon, 2021-11-29 17:38
Since the decedent was 3 years younger than the beneficiary and passed after the RBD, the beneficiary can use the decedent’s remaining LE instead of their own, and RMDs would be lower. Beneficiary’s first RMD divisor in 2015 based on decedent age 77 in 2014 would be 11.1, then reduced by 1.0 each year thereafter. The 2022 RMD will have to be reset as indicated by DMx above.
Permalink Submitted by John Boyle on Mon, 2021-11-29 17:42
The beneficiary turned 86 in 2021 (my mistake), so she would have been 79 in 2014. All RMDs have beven taken, but I never noticed this confusion. The year of death was 2014. In the 2014 Table I for beneficiaries shows a 10.8 divisor for a 79 year old. So are you saying the divisor for 2021 should be 3.8?
Permalink Submitted by David Mertz on Mon, 2021-11-29 17:58
I missed the fact that the decedent was younger than the beneficiary, so the factor to be used is 12.1 based on age 77 in 2014, reduced by 1 each subsequent year, resulting in a divisor of 5.1 for 2021.