RMD Schedule for Successor Beneficiary
I have a successor IRA question. My client inherited an IRA from her mother.
Mother died in 2015. My client was born in 1959 and has just died recently.
The client’s daughter is her beneficiary and I need to confirm the daughter’s RMD schedule.
I believe the daughter is subject to the 10-year rule as a successor beneficiary.
Is she simply completing the next 10 years of her mother-beneficiary’s schedule?
Said another way, the daughter would continue the same RMD schedule as her mother if her mother was still living except her RMD for the 10th year is 100%.
Am I correct in this? My confusion is the RMD schedule. Thanks. Paul McG
Permalink Submitted by Alan - IRA critic on Mon, 2022-12-19 15:15
The 10 year rule applies to daughter, and the inherited IRA must be drained by 2032. However, the proposed Secure Act Regs indicate that it will have to be determined if the original owner passed prior to or after her RBD in 2015. If prior, daughter will have no annual RMDs, but if on or after her RBD, client’s daughter will have to continue the annual RMDs based on her mother’s RMD schedule, with those divisors reset to reflect the new 2022 RMD tables. Client’s 2022 beneficiary RMD must also be completed by daughter if client did not complete it prior to passing. This IRS proposal will result in massive confusion, but it’s not yet final. Perhaps it will be before daughter must act on her 2023 successor beneficiary RMD requirement, if applicable.
Permalink Submitted by Paul McGillivray on Mon, 2022-12-19 15:44
Somewhere there must be laughter at this confusing mess, besides just you and I. What 20-Year Rule? I understand it’s the 10-year rule. I do understand what you explained. Thank you. I missed the part about the original owner passing pre-RBD allowing the Successor to take zero RMDs except the big one in 2032. I guess I assumed the IRS would RMDs from successors if the party they inherited from was taking RMDs, which they woudl have as the inheriting Beneficiary. I could not see two generations back. I appreciate the clarity. Paul McG
Permalink Submitted by Alan - IRA critic on Mon, 2022-12-19 16:49
Sorry, I edited the typing error to the correct 10 years. Nice of the IRS to allow LE RMDs to stop due to the 10 year rule, but only if the original owner passed prior to RBD. Of course, to avoid a tax spike in 2032, the successor may want to take some distributions each year even if they do not have to.