Minor kids inherit IRA from Great-Aunt
A client passed at age 65 (in 2021) and left her IRA to her great niece and great nephew. They are not children of the decedent so I presume they are not EDBs; therefore, they cannot stretch the IRA until they reach age 21 and then have the 10-year rule apply. Correct? Under the new rules issued earlier this year, do they need to take RMDs in years 1-9 and empty the account by year 10?
Thanks.
Permalink Submitted by Alan - IRA critic on Fri, 2022-06-03 17:24
Correct. They are only EDBs if disabled or chronically ill, so the 10 year rule will likely apply. However, since client passed prior to RBD, there will be no annual life expectancy RMDs under the proposed Regs. That said, they may want to take voluntary distributions to avoid the entire amount being taxable in 2031. The frequency and amount of voluntary distributions in years 1-9 will affect the kiddie taxes due at the parent’s marginal rate. They might be able to outwait the kiddie tax situation if the children are old enough, depending on if they go to college or not.
Permalink Submitted by Kimberley Feeney Zollo on Fri, 2022-06-03 17:34
Thanks so much!