2nd Generation Beneficiary IRA- Pre and Post Secure Act

Submitted by Krista McBeath on Thu, 2023-10-19 17:12

I am wondering about a scenario when a spouse becomes the owner of the inherited IRA, now a 2nd Gen Inherited IRA, post secure ACT. Her husband Inherited the IRA pre secure Act. Then, he passed in 2021 and his wife became the 2nd gen owner.

As the spouse of the owner of the Inherited IRA, does she have any options to treat this as her own at this point, or must she follow the secure act rules for designated beneficiaries and distribute over 10 years. This one is a bit perplexing. I know with an Inherited IRA, if a spouse fails to take a RMD, they are treating it as their own and should retitle. But I am doubtful this is allowed in this situation.



Submitted by Alan - IRA critic on Thu, 2023-10-19 21:31

Need to know if the original owner passed prior to their RBD or after, and if the designated beneficiary (now deceased) was a spouse or non spouse.

Submitted by Krista McBeath on Thu, 2023-10-26 20:54

The original owner passed away after their RBD at the age of 79, and the designated beneficiary (now deceased) was a non spouse to the original owner in 2018.  So at that time, Brian (the son of the original owner) had an inherited IRA under the lifetime rules.Brian passed away in 2021 and his spouse was his beneficiary.

Submitted by Alan - IRA critic on Thu, 2023-10-26 23:23

Brian’s spouse cannot assume ownership because this was a non spouse inherited IRA of the first beneficiary. The 10 year would applies to Brian’s spouse, and she must drain the inherited IRA by the end of 2031. Since the original owner passed after RBD, Brian’s spouse will have to take annual beneficiary RMDs in years 1-9 of the 10 year rule. Those annual RMDs are just a continuation of Brian’s RMD schedule with a divisor reduction of 1.0 for each year. However, the divisors must be reset for 2022 and beyond due to new RMD tables effective in 2022. This will slightly reduce the RMD amount. Actually, the RMD rules apply to Brian’s spouse in the same manner as if the successor beneficiary was any other relative of Brian. There is no RMD advantage for his surviving spouse.

Submitted by Krista McBeath on Sat, 2023-10-28 13:23

Great information.  And interesting to know- we had planned on the 10 year rule, and actually plan on her distributing at a higher rate for other reasons, BUT I am paying attention to the REQUIRED RMD in 1-9 subject to the divisor reduction rather than a drawn down over 10 years.  This is because the original owner was past his RBD, correct?  And because the original beneficiary was a non- spouse?

Submitted by Alan - IRA critic on Sat, 2023-10-28 14:49

Yes, the successor beneficiary must take annual RMDs because the original owner passed after RMDs had begun.Those RMDs continue the same divisor schedule that the designated beneficiary was using with the annual 1.0 reduction. Of course, the successor beneficiary can always take out more in any year if they wish.

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