IRA inherited by kids
This question is probably inanely simple but with the new SECURE Act rules, I want to make sure. I have a client that died this year. Her two kids inherited her IRA 50 / 50 each. Mom had met her RMD for the year at the time she passed. Does this mean the kids do not have to take any distributions for this year? They will start taking their RMDs (based on the new tables) next year – correct?
Thanks in advance for all assistance with this.
Permalink Submitted by Alan - IRA critic on Thu, 2022-11-10 14:28
Yes, that is correct. The kids (not minors) will be subject to the 10 year rule, but with annual RMDs per the proposed Regs if Mom passed after her RBD. If they have established separate inherited IRA accounts by the end of 2023, they can each use their own life expectancy based on their respective ages in 2023. 2022 RMD was completed by Mom.
Permalink Submitted by Alan Myers on Fri, 2022-11-11 17:03
Perfect! Yes the kids (both adults) have already established inherited IRA accounts. I had figured out that we are now subject to the 10-year rule to get the IRAs emptied and that along the way we must take at least the RMD per the tables (I assume we must use the new tables for these inherited IRAs). Obviously, we will need to take more than the minimum at some point along the way to get everything out within the ten year time frame. That does beg one more question. Since the inherited IRAs were started in 2022 and will begin distributions in 2023, by what year must they be empty – the end of 2032 or 2033?
Permalink Submitted by Alan - IRA critic on Fri, 2022-11-11 23:53
They must be drained by 12/31/2032. If they plan to level out the tax impact each year, they would withdraw more than the annual RMD to prevent a tax spike in 2032.