Eligible Designated Beneficiary Election

Submitted by Todd Kirsch on Thu, 2023-11-16 17:02

I have a client who is 72. Her brother died on 2/9/22 at age 67. She inherited his traditional IRA that is relatively small in amount. I believe she is classified as an eligible designated beneficiary who has the option to take annual RMDs over her lifetime or use the 10-year rule where no RMDs are required until year 10. Three questions: do you agree with this? Second, if she elects RMDs over her lifetime, does she need to take an RMD this year? Third, your latest newsletter talks about an “election” between the 2 methods. How does one make such an “election”? Is it based on the taxpayer behavior…or perhaps a form is required? Thank you in advance.



Submitted by Alan - IRA critic on Thu, 2023-11-16 17:46

  1. Yes, your statements regarding her options are correct.
  2. She has no RMD due for 2023.
  3. Good question pending IRS guidance. No specific action would be required if she retains EDB status, which is the default. But if she opted out of EDB status and into the 10 year rule, she should report this election to the IRA custodian no later than 12/31/2024 and follow the custodian’s documentation requirements in the unlikely event they have a procedure for this. This is similar to the pre Secure Act option of the 5 year rule over LE payouts for deaths prior to RBD where IRA agreements defaulted to LE but many custodians had no set procedure for opting for the 5 year rule, which few beneficiaries did.

Submitted by David Mertz on Thu, 2023-11-16 23:42

If the amount in the inherited IRA is a relatively small amount, is it even worth the trouble to maintain the inherited IRA?  If the distribution of the entire amount to the client in one year would not be taxed at a higher marginal rate and would not impact anything like Medicare IRMAA compared to taking it out in smaller amounts over several years, there is really not much point in maintaining the inherited IRA.

Add new comment

Log in or register to post comments