inherited IRA and 5 year rule
Client has this situation…
Her dad passed in March of 2020 and had her mom as his beneficiary. Her mom passed in July of 2020 and had not added any beneficiaries so the division of the IRA was done according to her parent’s will. Her dad was of the age where he was required to withdraw according to RMD rules, So apparently no beneficiaries were named on her mother’s IRA. However, her inherited IRA was set up with her Dad as the decedant. Would she be subject to the 5 year withdrawal rule?
Thank you.
Permalink Submitted by Alan - IRA critic on Thu, 2022-11-17 22:27
No. Mom would not be treated as the owner of the IRA since Dad passed after RBD. Mom is treated as an EDB who passed and triggered the 10 year rule for her beneficiary, her estate. Separate inherited IRAs assigned out of her estate by the executor are subject to the same 10 year rule that requires the inherited IRAs to be drained by 12/31/2030, however because Dad passed after RBD, there would also be annual RMDs in years 1-9. The IRS has now waived those annual RMDs for 2021 and 2022, so if the proposed Regs are finalized as proposed, the current beneficiaries would have to start annual RMDs in 2023. The IRS will have to determine whether the 2021 and 2022 beneficiary RMDs will have to be made up after 2022 or not. It would have been preferable to title these inherited IRAs as beneficiary of Mom’s estate, but showing as inherited from Dad should not have any negative implications and does not affect their RMD schedule.