Successor Beneficiary

Submitted by ShipsnGiggles on Wed, 2022-08-10 16:21

A non-spouse beneficiary has been “stretching” an Inherited IRA (original account owner died in 2018)
Beneficiary dies in 2021 leaving the (inherited) IRA to his son, age 40

Must the son, as successor beneficiary, take RMDs (in years 1-9) of his 10 year payout?

Thank you



Submitted by Alan - IRA critic on Wed, 2022-08-10 21:25

  • A firm answer depends on the final Secure Act Regs. If the original owner passed prior to their RBD, the son will be subject to the 10 year rule without annual RMDs in years 1-9. However, if original owner passed on or after their RBD and the proposed IRS Regs become final as submitted, the son will have to take annual beneficiary RMDs in years 1-9. Those RMDs would be continuing the RMD schedule of the first beneficiary, reducing that beneficiary’s divisor by 1.0 each year.  The son was also responsible for completing his father’s 2021 beneficiary RMD if father did not complete. Finally, due to new RMD tables for 2022 and beyond, the divisors must be reset to reflect the new tables. Very complex combination of variables apply here, and the IRS proposed Regs do not reflect any attempt to keep the rule simple and understandable.
  • Keep in mind that even if the son needs to take annual beneficiary RMDs, it may be beneficial to draw the account each year of the 10 year period to avoid a large tax spike in year 10.

  

Submitted by Jennifer Butler on Fri, 2023-12-08 19:34

We have a similar situation, in that a client inherited an IRA from his mother, who died after her RBD in 2013. He had been taking his RMD based on his own age until this year when he died. His wife is the successor beneficiary. Does she have to continue the distributions based on her own age, and I assume she has to drain the account in 10 years?  

Submitted by Alan - IRA critic on Fri, 2023-12-08 21:28

Wife will have to drain the account in 10 years (2033), but will also have to continue the RMD schedule of her husband. Her own age is immaterial. 

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