Impact of NEW IRS Life Expectancy Tables on Inherited IRA Required Minimum Distributions
The introduction of new IRS Life Expectancy Tables has created a question regarding Inherited IRAs whose initial life expectancy was established prior to the SECURE Act .
For example, if an IRA owner died in 2018 and the 70 year old beneficiary set up an Inherited IRA using an initial life expectancy of 27.4 years (age 70). The 2022 RMD factor would look like this using the old tables and one-year reduction method:
2018 27.4
2019 26.4
2020 25.4
2021 24.4
2022 23.4
The question is do we continue under the old schedule using a factor of 23.4 for 2022, OR do we introduce the new 2022 factor for a 74 year old which is 25.5 and begin reducing that by one each year going forward.
Thoughts?
Permalink Submitted by Alan - IRA critic on Sat, 2022-01-08 00:59
Inherited IRA RMD divisors must be “reset” to reflect the new tables effective in 2022. However, in your example it appears that the Uniform Table divisor was used and the Uniform Table never applies for beneficiary RMDs. To retrace this situation back to 2019, the year of the first beneficiary RMD requirement, if the beneficiary was 71 in 2019, the 2019 divisor should have been 16.3. The 2019 RMD fell far short of the correct RMD. 2020 RMD were waived, and the 2021 beneficiary RMD would have been 14.3.
For 2022, the new table must be entered for a 71 year old, the beneficiary’s age in 2019. That divisor is 18.0. Since 3 years will have passed to 2022, the 18.0 divisor is reduced by 3.0 and the 2022 beneficiary divisor is than 15.0.
The beneficiary evidently fell short of the RMD requirement in 2019 and 2021. Also, the beneficiary was responsible for completing the owner’s 2018 RMD if the owner passed was subject to RMD that year and did not complete the full amount.