Successor Beneficiary Example - What If Spouse Inhierts

Submitted by brcwm on Wed, 2023-04-12 16:06

A client inherited an 403(b) from his mother in 2015. Mother was born in 1933. The client has been taking stretch beneficiary RMDs since then.

What if the client was to pass away this year? The beneficiary on the inherited 403(b) is the client’s wife. Client was born in 1956, and the wife was born in 1957.

Does the wife continue the husband’s stretch beneficiary RMDs based on the husband’s life expectancy on the Single Life Table (Table II)?

Flag as spam

Permalink Submitted by Alan - IRA critic on Wed, 2023-04-12 16:19

When client passes the 10 year rule will kick in per the Secure Act, but because mother passed after her RBD the beneficiary RMD schedule of client (reset for the new 2022 RMD tables with annual 1.0 divisor reductions) must continue is years 1-9. Client’s wife will also have to complete client’s year of death RMD if not completed by client. The single life table continues to apply (Table I) when resetting the divisors to the new table, but after that the annual 1.0 divisor reduction will eliminate the need to refer to the table after the 2022 reset.

Permalink Submitted by brcwm on Wed, 2023-04-12 18:58

So let’s say the client passes away this year. Client has already taken his stretech RMD from his Beneficairy account. The Bene account is transferred into a Beneficary IRA FBO Wife. Next year, the wife will need to take an RMD based on Husband’s life expectacy using the 2022 IRS Table 1. He turned 59 the year his mother passed away, and 60 the year after (first year of RMD) so that is a factor of 27.1. From there, we reduce the divisor by 1 each year since then.

2023 it is at 20.1, which was taken by husband prior to passing.
2024 it is 19.1 which is the first year taken by wife, and she continues subtract 1 each year (but must also abide by the 10-year rule). So, depleted by 2033.

Is this correct?

Permalink Submitted by Alan - IRA critic on Wed, 2023-04-12 20:21

Yes, entirely correct.