Death of Successor Beneficary

Submitted by Emmie Majka on Tue, 2023-06-27 14:52

Grandma was the IRA owner and died in 2012 after having begun RMDs. Mom inherited the IRA and began distributions over her own life expectancy, per pre-secure act rules.

Mom died in 2022 and left her IRA to her husband. As a successor IRA beneficiary, husband began taking distributions over 10 years with RMDs.

Husband recently died with assets remaining from his “inherited inherited” IRA that had been his mother in-law’s IRA.

Brokerage firm termed the account a “remainder inherited IRA” and did not allow husband to designate beneficiaries, therefore the husband’s estate is the beneficiary. Brokerage firm also holds that the IRA must now be fully distributed lump-sum because the 5-year distribution period does not apply to “remainder inherited IRAs.”

Is this correct? If anyone could point me towards resources about what happens to an IRA when a successor IRA beneficiary dies, it would be much appreciated!



Submitted by Alan - IRA critic on Tue, 2023-06-27 16:39

  • Once the 10 year rule applies, later deaths do not affect the RMD calculations. Therefore, this inherited IRA must be drained by 2032, and because Grandma passed post RBD, the RMD schedule that Mom was using must continue as adjusted for the new RMD tables in 2022. If husband did not complete his 2023 year of death RMD, his estate must do so.
  • There is no logical reason for the brokerage firm to cut off beneficiary designations for successor beneficiaries. This may be part of the plan to eliminate this account even sooner than 2032, so I expect the brokerage may refuse to allow the executor to assign the inherited IRA out of husband’s estate to the beneficiaries under his will as separate inherited IRAs. That would result in the estate having to either transfer the IRA to new custodian or accept a lump sum distribution in order to close the estate.
  • Inherited IRAs are not attractive to most custodians, particularly since multiple separate smaller inherited IRAs are even less attractive, and estates may be prone to litigation. However, none of this affects the RMD calculation, which remains locked to Mom’s LE RMD calculation divisors reduced by 1.0 for each successive year. 

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