Inherited IRA Distribution for 2023

Submitted by Ray Hoctor on Mon, 2022-12-05 15:10

My mother inherited an IRA in 2021 from her husband after his death at age 74. From advice I received from this forum we used the Uniform Lifetime factor of 23.8 for remaining distribution for 2021 and switched to the Single Life Expectancy factor of 14.6(15.6-1) for 2022.
My question is for 2023 do we use the Single Life Expectancy age 76 divisor -1 (14.1 -1=13.1), or do we use continue to use the age 74 divisor and subtract 1 from the 14.6 divisor we used in 2022, which would be 13.6?



Submitted by Alan - IRA critic on Mon, 2022-12-05 15:54

  • That’s correct for 2021. Apparently mother is around the same age as her husband. She should have elected to assume ownership of the inherited IRA this year before taking a distribution, and then used the Uniform table for 2022 and beyond. Her RMDs would be much lower. She can assume ownership in January and then use her age in 2023 with the Uniform table and do that every year.
  • You referred to prior advice given here. Could that have been for a non spouse beneficiary? Spousal options are much different.


Submitted by Ray Hoctor on Mon, 2022-12-05 16:50

Acutally, she is much older than he was and we chose to go with his age factor as a spousal beneficiary.  I was unsure on this year’s distribution because of  where to start.  From the Single Life Exp., do I go back to the age 74 factor and compute for 2023, or do I use the age 76 factor and subtract one?Thanks



Submitted by Alan - IRA critic on Mon, 2022-12-05 17:53

  • When using the decedent’s age, the 1.0 reduction applies each year, while eventually the Uniform Table could produce a lower RMD because of its lower annual reductions, and ownership could be assumed once that occurs. For now, the new 2022 RMD table is used to determine the single life table divisor starting point for decedent’s age in 2021 (15.6), then that divisor is reduced by 1.0 for each year thereafter. 14.6 is correct for 2022 and 13.6 for 2023. 
  • That said, the proposed Secure Act Regs impose some complications and restrictions that did not exist prior to 2020. These are overly complicated and tougher on older beneficiaries if adopted as proposed.
  • In your case,  a new restriction requires that the decedent’s LE can only be used until the year that mother’s own single life expectancy, using her age each year for her divisor and re entering the table each year for a new divisor, would have dropped below 1.0. You could determine what year this would occur now. At that point the inherited IRA must either be drained or ownership could be assumed, allowing the RMDs from that year on to be calculated using the Uniform Table. There is a default rule that states a sole surviving spouse that does not complete a year’s beneficiary RMD automatically defaults to ownership in that year. As such, not knowing about this complex restriction would not result in a forced total distribution, but would just result in deemed ownership and a changeover to the Uniform Table.
  • Please post any further questions about this, or if you need assistance in determining how many years the decedent’s LE can be used given your mother’s age.


Submitted by Ray Hoctor on Mon, 2022-12-05 22:00

Wow.  Just when I thought I was getting the hang  of this.  If I understand this correctly, the calculation of the minus one factor each year from the Single Life Table at its starting point of 15.6 would have to be  less than the divisor from the Uniform Table before she would have to assume ownership.  Since she will be 97 next year it looks like she still has several years to go since her divisor will be 7.8 on the Uniform Table.Thank you for directing me to the proper divisor for next year (13.6).  This forum has been very helpful.



Submitted by Alan - IRA critic on Mon, 2022-12-05 23:12

  • The age difference and death order here is unusual, so I just checked the tables to see when her single life divisor would drop to 1.0, and because she is a sole spouse beneficiary and does not reduce her divisor by 1.0 each year like a non spouse, the single life table actually does not drop to a divisor of 1.0 until she is 120! Therefore, this restriction will not be a factor in her case. She can just continue to take beneficiary RMDs using her husband’s remaining LE reduced by 1.0.
  • Seeing where this goes, under the current RMD divisor reductions of 1.0, the divisor would reach 3.6 in 2033 (age 107) , and the Uniform Table for age 107 divisor is 4.1. Therefore, electing ownership of the inherited IRA would not reduce her RMD until 2033. Therefore, she can just keep the annual 1.0 divisor reductions for the next 10 years to keep the RMDs lower than the Uniform Table.
  • Her successor beneficiary would be subject to a new 10 year rule when she passes, but would have to continue her RMD schedule unless she assume ownership before she passes. In that case, her successor beneficiary would be a designated beneficiary instead of a successor beneficiary and could take annual RMDs within the 10 year rule based on their own single life expectancy.

 



Submitted by Ray Hoctor on Tue, 2022-12-06 03:16

Good Information.  I am sure I will be back with more questions in the future.Thanks for all your help and advise



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