Successor Beneficiary

Submitted by Wendy Mommaerts on Mon, 2022-05-16 19:50

We have a client, Jane who inherited her dad’s bene IRA…

Janes mom passed away in 2013
Janes Dad inherited mom’s IRA, kept it as a bene IRA and began RMDs in 2014 at the age of 89
Dad passed away in 2020
Jane now inherited dads bene IRA as a successor bene

would Jane be able to continue dad’s RMD schedule using the single life table and recalculate (not decrease by 1 each yr) for years 1-9 and then empty her bene IRA by 12/31/2030?



Submitted by Alan - IRA critic on Mon, 2022-05-16 23:07

These situations can be very complex, and require investigation back to the original owner’s death. Based on dad’s age, I will assume that Mom passed after her RBD iin 2013. Please advise if this is incorrect.
The answer to your question is Yes. Accordingly, client as successor beneficiary will be subject to the 10 year rule, and have to drain the inherited IRA by the end of 2030. But in addition, because Mom passed after RBD, client will have to continue annual RMDs each year 1-9 within the 10 year rule period if the proposed Secure Act Regs are adopted. These annual RMDs would be based on dad’s 2020 RMD divisor (had there been 2020 RMDs required), but then reduced by 1.0 for 2021, reset to the new 2022 tables for the 2022 RMD with continued 1.0 annual divisor reductions.
Note: It is odd that Dad did not assume ownership of the inherited IRA, as his RMDs as owner using the Uniform Table would have been much lower than using the single life table. Also, if Dad fell short of the full beneficiary RMD in any year 2014-2019, he would have defaulted to ownership. And if that occurred, client would NOT be a successor beneficiary, but rather a designated non EDB beneficiary. The 10 year rule would still apply to client, but the annual RMDs in years 1-9 would be lower, based on client’s age.

Submitted by Wendy Mommaerts on Tue, 2022-05-17 15:18

Thank you and yes I was also wondering why the dad didn’t move these assets to his own IRA.

Submitted by Wendy Mommaerts on Wed, 2022-07-13 19:56

I would like to confirm the RMD schedule for our client. You state that in 2021 our client will calc her 2021 RMD by reducing her dad 2020 RMD divisor by 1 (ex: 2020 divisor is 17.8, the 2021 divisor would then be 16.8)?So in 2021, the 1st year our client would need to take an RMD, we just reduce by 1?

Submitted by Alan - IRA critic on Wed, 2022-07-13 21:03

  • My last sentence in the 5/16 post is incorrect. Because client is a successor beneficiary, they cannot use their own age for RMDs, they will have to continue Dad’s rather short RMD schedule. Dad’s beneficiary IRA divisor for 2020 (Had their been RMDs in 2020) would have been 4.1. That divisor is reduced to 3.1 for the 2021 client RMD, and for 2022 with the reset to the new tables, it would be 2.0. There is no benefit from the new tables at very advanced ages. Sounds like client fell short for the 2021 RMD by using her own age instead of Dad’s, and if so the shortfall from 2021 would have to made up, and it looks like the IRA would have to be totally distributed by the end of 2023 due to a divisor of 1.0 for 2023. 
  • Her RMDs would be much less if it could be established that Dad failed to complete his full beneficiary RMD in any year, as he would then have defaulted to the owner, and Jane would then be a designated beneficiary instead of a successor beneficiary. She could then use her own age instead of Dad’s advanced age.

Submitted by Wendy Mommaerts on Fri, 2022-07-15 13:08

If the ruling comes back and it was decided that beneficiaries would not have to take annual RMDs during years 1-9, and have the option to wait until year 10 to withdraw 100% of their account, would our client above then be on a 10yr rule and have until 2030 to empty the account? 

Submitted by Alan - IRA critic on Fri, 2022-07-15 15:58

Yes, that is correct. 

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