Inherited IRA Beneficiary
Two separate questions:
1. An 80 year old woman passed away and named her twin sister as beneficiary. Is the twin sister able to elect the 10 year since she is an eligible designation beneficiary but the IRA owner was over the age of 72? If she is unable to elect the 10 year rule, do RMDs need to come out over the remaining single life expectancy of the twin sister beneficiary (reducing by 1 each year)?
2. A friend’s mom left her estate as beneficiary of her IRA. She was 85 when she passed and she has two grown children who are to inherit her assets per the instructions in her will. Is it possible to have the IRA divided into two Inherited IRAs for each child (I assume the IRA custodian would have to allow this)? If so, will the 10 year rule apply to each of them? If the IRA can’t be split, how are required distributions supposed to be handled going forward?
Thank you for all you do for this discussion forum!!!!!!
Permalink Submitted by Alan - IRA critic on Wed, 2021-12-15 22:26
The twin sister beneficiary cannot elect the 10 year rule because her sister passed after her RBD. Her beneficiary RMDs are based on her age in the year after death using the new single life table going into effect in 2022. The 2022 divisor is then reduced by 1.0 for each successive year after 2022.
The executor of mom’s estate can request that the inherited IRA be assigned to the two children as beneficiary IRAs for each one. While the IRS has approved this, some custodians decline to cooperate with this request and then are not required to. Larger brokerage custodians are more likely to cooperate. Whether the separate inherited IRA accounts are established or not, the RMDs do not change. The beneficiary RMDs are based on the remaining single life expectancy of mom. The children or the estate are also responsible for completing Mom’s year of death RMD if she did not do so. If Mom passed in 2021 and would still have been 85 at the end of the year, the divisor for the 2022 beneficiary RMD for both children will be 7.1, then reduced by 1.0 for each year after 2022.
If the IRA custodian will not cooperate with the IRA assignment, transferring it to a custodian who will would enable this. Perhaps a custodian that the child already has a relationship with would cooperate with the assignment request.