INHERITED IRA- ORIGINAL OWNER, MY SISTER PASSED AT AGE 63, THIS YEAR. I AM (71) NOW, WILL TURN 72 IN AUGUST 2023

Submitted by ANTHONY SOKOLICH on Wed, 2022-11-09 16:42

HELLO. I REALIZE THAT THE “SECURE ACT” IS IN PLAY HERE, AND THERE IS PENDING LEGISLATION STILL ON THE HORIZON. SINCE MY SISTER DID NOT REACH HER (RBD), REQUIRED BEGINING DATE, I START PULLING FROM BOTH HER IRA’S AND MY IRA’S THE YEAR I TURN 72, IS THAT CORRECT? I WILL TURN 72 ON AUGUST 16, 2023. THAT BEING SAID, I BELIEVE I HAVE UNTIL APRIL 1, 2024, TO TAKE BOTH A DISTRIBUTION FROM MY SISTER’S IRA’S, (THE 10 YEAR RULE), AND MY RMD’S ACCORDING TO THE RMD TABLE ASSIGNED TO ME. OR DO I HAVE TO PULL FROM MY SISTER’S INHERITED IRA IN 2023 TO AVOID A PENALTY? ALSO, OVER THE 10 YEAR PERIOD FOR MY SISTER, CAN I PULL EQUAL AMOUNTS OUT OVER THE (10) YEARS OR DO I FOLLOW A SPECIFIC RMD TABLE?

I REALIZE THAT EVERYONE’S SPECIFIC SITUATION IN UNIQUE AND ALL OF THIS SUBJECT MATTER IS VERY CONFUSING TO MOST PEOPLE WHO DON’T SPECIALIZE IN “TAX PREPARATION.” PLEASE WEIGH IN ON MY SPECIFIC SITUATION AS YOUR TIME ALLOWS. I AM SEEKING SOME GUIDANCE AND DIRECTION FROM A TRUE PROFESSIONAL. THANK YOU!



Submitted by Alan - IRA critic on Wed, 2022-11-09 17:42

  • For your inherited IRA, you are an EDB  (eligible designated beneficiary) because you are not more than 10 years younger than your sister. As such you must start life expectancy RMDs next year (by 12/31/2023 not 4/1/2024 and you are NOT subject to the 10 year rule. Your inherited IRA will last around 16 years. The single life table applies to this account. You also have the option to opt out of EDB treatment and into the 10 year rule, which would eliminate the annual RMDs, but you would have to drain the inherited IRA by 12/31/2032. You are likely better off to stick with the EDB treatment and annual RMDs because the inherited IRA will last about 6 years longer.
  • For the IRA you own, your first RMD year is 2023, but that RMD could be delayed until 4/1/2024. However, not taking the 2023 RMD until 2024 will result in two years of RMDs in 2024. For your own IRA you will use the Uniform Table each year and that table results in lower RMDs than the single life table you must use for the inherited IRA. These two IRAs cannot be combined in any way, and RMDs for each must be separately distributed.

Submitted by ANTHONY SOKOLICH on Sun, 2023-02-12 16:52

HELLO ALAN.  THIS QUESTION PERTAINS TO YOUR FIRST BULLET POINT ABOVE.  OVER 50 % OF MY SISTER’S IRA’S ARE IN A “ROTH ACCOUNTS.”  ARE HER “ROTH DOLLARS” IN PLAY FOR HER INHERITED IRA?  PLEASE WEIGH IN WHEN YOU CAN.  ALSO, THANK YOU FOR PROVIDING SUCH A GREAT SERVICE. 

Submitted by ANTHONY SOKOLICH on Sun, 2023-02-12 16:53

HELLO ALAN.  THIS QUESTION PERTAINS TO YOUR FIRST BULLET POINT ABOVE.  OVER 50 % OF MY SISTER’S IRA’S ARE IN A “ROTH ACCOUNTS.”  ARE HER “ROTH DOLLARS” IN PLAY FOR HER INHERITED IRA?  PLEASE WEIGH IN WHEN YOU CAN.  ALSO, THANK YOU FOR PROVIDING SUCH A GREAT SERVICE. 

Submitted by Alan - IRA critic on Sun, 2023-02-12 18:00

For the inherited Roth IRA, the RMD rules are the same as for the inherited traditional IRA. If she first contributed to a Roth IRA prior to 2019, the inherited Roth is qualified and entirely tax free. Any distributions you take including RMDs need only be reported on line 4a of Form 1040. If you find that her first contribution was not made for a year prior to 2019, then your RMDs will likely still be tax free but you will have to research what her Roth IRA basis is for entry on Form 8606, and that can be difficult. First, just try to see if there are any records that she first contributed prior to 2019. The inherited Roth IRA must be kept separate from any other inherited or owned IRAs  except other inherited Roth IRA accounts you inherited from her.

Add new comment

Log in or register to post comments