Inherited IRA
My mother inherited an IRA this year from her spouse. He died in March at age 74 and had received three monthly RMD distributions before his death. HIs IRA was transferred to my mother a month later. Since she was 20 years older, she elected to use his age factor and she was set up as a beneficiary to the account. She is now set up to receive the RMD under Table 1 Single life Expectancy at his age factor for 2022 using a factor of 14.8 instead of 24.6.
For 2021, she took out the rest of his RMD, plus some extra.
My questions is: After the account transfer, is she required to use Table 1 and use a factor of 14.1for 2021, or can she use his Uniform Lifetime factor of 23.8 for 2021.
Also, is she required to use Single Life Expectancy after 2021?
We are working to different years here and I am trying to clarify each one.
Permalink Submitted by Alan - IRA critic on Sat, 2022-01-08 19:43
For 2021 she is only required to complete his 2021 RMD which is based on the age he would attain in 2021. Therefore, if he would have reached 75 by the end of 2021, his Uniform Table RMD would be based on age 75, not 74.
Because she is considerably older, her RMDs will be less using his attained age, which raises the same question regarding the age he would have reached by the end of 2021. Because there are new RMD tables effective in 2022, her beneficiary RMD divisor is attained by determining his single life expectancy in 2021, then reducing that divisor by 1.0 for each successive year. If his correct age at the end of 2021 was 74, that divisor using the new tables is 15.6. To be clear, this divisor is never used for any year’s RMD, it is just the starting point to determine her correct beneficiary divisor for 2022. Reduced by 1.0, her 2022 divisor would be 14.6. If he would have reached 75 by the end of 2021, then her 2022 beneficiary RMD divisor would be 13.8.
His correct Uniform Table divisor for 2021 determines his RMD, and she needs to complete that RMD to the extent he did not. Her age does not matter for 2021, and in fact will not matter as long as she maintains the IRA as inherited since his Single life expectancy will continue to apply as that produces the lower RMD. Account transfers have no effect on these rules.
Finally, note that if she does not complete her full beneficiary RMD in 2022 or beyond, she defaults to ownership status. This rule actually helps the typically younger beneficiary, but in her case it would increase her RMD, so if she wants the lowest possible RMD she needs to be sure to distribute the correct annual RMD each year. The beneficiary that she names will be subject to the Secure Act 10 year rule when they inherit.
Permalink Submitted by Ray Hoctor on Sun, 2022-01-09 16:18
Thank you for your through explanation. The deceased would have been 74 at the end of last year(2021). So, we would use 23.8 from Uniform Table for his distribution for 2021, and 14.6(15.6-1 from the new Single Life Table) for the RMD for 2022. Is that correct?
Permalink Submitted by Alan - IRA critic on Mon, 2022-01-10 14:58
Yes, that’s correct.
Permalink Submitted by Ray Hoctor on Tue, 2022-01-25 15:38
I came across another question regarding my mother’s inherited IRA when I was attempting to prepare her tax return on TurboTax. For 2021, her husband took out only three equal distributions for the year. After that , the account was transfered to the beneficiary ( my mother) and she took out the remaining RMD plus some additional funds. I received a 1099R for her and am waiting for his. But, when I entered the amounts in TurboTax, it shows a defict on his side for his remaining RMD.The question is, If my mother took out his remaining RMD when the account was transferred as an inherited account with her as the beneficiary, why is it asking for the remaining RMD for him? Should his remaining RMD have been taken out before the transfer?
Permalink Submitted by Alan - IRA critic on Tue, 2022-01-25 16:34
You should be filing a final joint tax return signed by mother as surviving spouse, and it should show his DOD on the top of the 1040, p 1. Ttax may still show an RMD warning, but ignore it if you know that mother completed his 2021 RMD from the inherited IRA.
There was no way for mother to complete his RMD until after the inherited IRA had been retitled and transferred to a new inherited IRA under mother’s SSN. You have her 1099R showing the additional distributions. So unless Ttax asks about a beneficiary completing an owner’s RMD, just ignore the warning and be sure that there is no 50% excess accumulation penalty applied by Ttax.
Permalink Submitted by Ray Hoctor on Tue, 2022-01-25 16:57
Ok. Thanks for all your help.
Permalink Submitted by David Mertz on Tue, 2022-01-25 21:41
Also, the only amount that should be indicated to TurboTax as the amount your mother’s husband was required to take is the amount that he actually took (the three distributions), not the total amount of his RMD for 2021. Your mother became responsible for the remainder of his RMD upon his death, so that portion should be included as part of the amount that *she* was required to take. Doing this will avoid TurboTax inappropriately preparing any Form 5329 indicating an RMD shortfall.