successor beneficiary of an inherited IRA
Bill is 55 and inherited a beneficiary IRA from his mother, Karen, who inherited the IRA from her father. Karen inherited the IRA under the old IRA stretch rules and was taking RMD’s based on her Life Expectancy. How does Bill handle the IRA now that he is 2nd generation beneficiary? Thanks
Permalink Submitted by Alan - IRA critic on Mon, 2023-04-24 18:53
Bill is subject to the 10 year rule, and must continue the annual RMD schedule mother was using if her father (original IRA owner) passed on or after his RBD. If father passed prior to his RBD, then Bill is not required to continue annual RMDs in years 1-9 of his 10 year rule.
Permalink Submitted by Michael Eastham on Mon, 2023-04-24 21:15
just as a point of clarification; Bill must empty out the IRA in 10yrs from his mom’s passing, but must continue with RMD’s based on his mom’s schedule, correct? Karen’s father did pass after his RBD – FYI. Thanks
Permalink Submitted by Alan - IRA critic on Mon, 2023-04-24 21:23
Correct. The LE Divisors used by Mom must be reset for 2022 to reflect the new tables, and the divisor continues to reduce by 1.0 for each year.
Permalink Submitted by Chuck 2009x on Tue, 2023-04-25 10:19
So with the combination of the RMD and 10 year-rule, Bill would use Mom’s divisors to calculate RMDs for Years 1 – 9, but in Year 10, the divisor essentially becomes 1 and he must empty the account, is that correct?
Permalink Submitted by Alan - IRA critic on Tue, 2023-04-25 14:38
Correct, except that the divisor in year 10 does not become 1.0, which would not drain the account if it had gains in the final year. In year 10, there is no divisor but the account must be totally drained.