Non Eligible IRA Beneficiary

Submitted by James Arnold on Wed, 2023-02-08 14:30

I have a non eligible beneficiary who inherited an IRA from her brother. He was under age 70 and died in January 2023, she is age 50, it is milky to me what her RMD requirements are now and would appreciate some help figuring this out please. Can she wait 10 years to take one distribution or does she have to annual RMD and if so based on what age, his or hers? Thank you all in advance!

Mike Arnold



Submitted by Alan - IRA critic on Wed, 2023-02-08 15:35

Brother passed prior to RBD, so she is not subject to annual beneficiary RMDs, just the 10 year rule. The inherited IRA must be drained by 12/31/2033, but waiting until the end of this period may result in a large distribution and spike her taxes in that year. If she is not maxing out her own retirement plans, she could take annual distributions and use them to allow her to contribute more to her own plan, for which RMDs will be far down the road.

Submitted by James Arnold on Wed, 2023-02-08 16:37

Alan, thank you for your reply! Yes when I spoke to her and her husband those were my recommendations too. We will manage the distributions to keep them in as low of a tax bracket as possible. Glad we have the 10 years to figure this out.

Submitted by Carlos Lopez on Tue, 2023-02-14 06:07

I agree the funds have to come out by the 10th year in this case. However, the IRS just provided guidance that the brother WILL have to take annual RMD’s for years 1-9 and all the rest in 10th year. Don’t miss these RMD’s!  When Secure Act (2019) passed, it was not clear on whether RMD’s were needed and the industry sort of adopted the 10 year rule to mean everything should come out by year 10. This is the guidance we followed at my firm as well. Not any more, the IRS makes this clear that annual RMD’s must be taken.

Submitted by Alan - IRA critic on Tue, 2023-02-14 14:31

  • Not correct. Annual LE RMDs within the 10 year rule are only required when the plan owner passes after the RBD. In this case the owner passed prior to RBD, therefore the 10 year rule applies without annual RMDs in years 1-9. It was stated that the beneficiary was not an EDB and therefore the 10 year rule applies. The following is copied from the proposed Secure Act Regs relative to IRS Reg 1.401(a)(9)-3 (Death prior to RBD):
  • “(B) If the employee dies on or after the effective date of section 401(a)(9)(H) (as determined in §1.401(a)(9)-1(b)(2)(i) or (ii), whichever applies to the plan) and has a designated beneficiary who is not an eligible designated beneficiary, as determined under §1.401(a)(9)-4(e), distributions must satisfy the 10-year rule described in paragraph (c)(3) of this section; and (C) If the employee has an eligible designated beneficiary, distributions must satisfy the life expectancy rule described in paragraph (c)(4) of this section. “

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