beneficiary IRA
I have a client who has a beneficiary IRA that has been distributing for the last 8 years, the beneficiary has passed away and her husband is the new beneficiary. Will it be titled under the deceased spouse name with the living spouse as beneficiary, but needs to be distributed in 10 years or less? or can the living spouse use the original deceased lifetime table that was being used. Thanks..
Permalink Submitted by Alan - IRA critic on Wed, 2022-03-16 16:06
The twice inherited IRA should be titled showing name of new beneficiary as beneficiary of former beneficiary. The 10 year rule kicks in for the successor beneficiary. The successor beneficiary must distribute the year of death RMD for the designated beneficiary, annual RMDs then stop, but the successor beneficiary must drain the inherited IRA by the end of the 10th year, ie by 12/31/32 if designated beneficiary passed in 2022.
Permalink Submitted by Kimberly Fink on Wed, 2022-03-16 16:33
No, no RMD’s have been taken from this account because it has been in probate. The owner passed in 2017 so it is subject to the old distribution options – Lump Sum, 5 Year Rule, or Life Time Income. The executor delayed processing the 401k for several years, so I am concerned my client(the sister of the executor) has only one choice – zero out the IRA under the 5 year rule, effectively cashing out the 401k in 2022, the 5th year, to avoid penalties. She is going to have a massive tax bill because of this. She would have preferred to take life-time income. What can I do for her? I think we will have to calculate her past RMD’s(if I can get those values from the executor), take the RMD’s in 2022, then file a 5329 with the IRS with a letter begging for mercy on the 10% penalty. Opinions?
Permalink Submitted by Alan - IRA critic on Wed, 2022-03-16 20:13
The above post appears unrelated to this thread. Please repost as a new subject. Thank you.