Inherited – Inherited IRA RMD Life Expectancy Tables
Dear Mr. Slott and Team:
I hoped your team might provide guidance on a unique inherited IRA case.
Case details below:
1. A client’s husband inherited his father’s IRA (Pre-SECURE Act) in 2017.
a. The husband (original IRA beneficiary) began taking RMD’s off the old IRS life expectancy tables.
2. The husband (original IRA beneficiary) passed away in 2021. An RMD was taken in 2021, the DOD year.
3. His wife is now the beneficiary of the husband’s inherited IRA.
Based on initial research, per the SECURE Act, a successor beneficiary that inherits an IRA post-SECURE Act from someone who originally inherited it pre-SECURE Act, the successor beneficiary has a 10-year window to fully distribute the RMD, even if they meet one of the exceptions (minor, disability, spouse).
What is less clear is how the new IRS guidance requiring annual RMD’s will affect this. The new guidance indicates that beneficiaries must take annual RMD’s based on their own life expectancy, even if the decedent was already subject to RMD’s. In this case, the husband was subject to RMD’s since he inherited the account pre-SECURE Act; it appears an argument could be made that the client (wife) should take RMD’s based on her life expectancy.
Question:
What life expectancy table is the wife required to use? Considering the recent change to the IRS life expectancy tables, a material difference exists in amount of the RMD calculation.
We would tremendously appreciate your insight.
Permalink Submitted by Alan - IRA critic on Tue, 2022-12-06 18:58
Your question suggests that the original owner (father) passed post RBD. As such, the wife must continue annual LE RMDs in years 1-9 of her 10 year rule. Since she is not a desigated beneficiary, rather a successor beneficiary, she must continue the RMD schedule of her husband with annual 1.0 divisor reductions. The final complexity is having to “reset” these divisors because due to the new RMD tables for 2022 and beyond. To do that, the new table must be used to determine what husband’s initial divisor would have been in 2018, and subtract 4.0 from that divisor to determine the 2022 RMD, as 4 years have passed. The wife’s age is irrelevant as a successor beneficiary.