Successor Beneficiary IRA RMD Calc question

Submitted by Jeanette LoPiccolo on Tue, 2024-02-06 20:59

Hello! Our client, Carol, owned an IRA. She died post RBD (age 79) in 2017. Her spouse, Rupert, was 7 years older so he created an inherited IRA to minimize the RMD.

Rupert died in Feb 2020 at age 86. His beneficiary is his son, Garrett, who doesn’t qualify as a eligible designated bene so we plan to empty the account by 12/31/2030.

My question is: Should the annual RMDs on this successor bene IRA be calculated on Rupert’s life expectancy or Garrett’s life expectancy?



Submitted by Alan - IRA critic on Tue, 2024-02-06 21:36

  • Rupert did not reduce his RMD by using Carol’s younger age because the Uniform Table that he could have used by assuming ownership would have produced a much lower RMD despite his being 7 years older. The single life table RMDs will be higher unless the beneficiary is much older than 7 years. 
  • As to your question, it should first be determined if Rupert might have failed to take his full beneficiary RMD in either 2018 or 2019, as such a failure would have resulted in default to ownership, and Garrett would then be the designated beneficiary who could use his own LE starting with 2021 RMDs, but subject to the 10 year rule. However, if Rupert took his (higher) beneficiary RMDs in 2018 and 2019, he remained a beneficiary and Garrett would then be treated as a successor beneficiary who became subject to the 10 year rule, with annual RMDs in years 1-9 based on Rupert’s RMD schedule with divisors reset to reflect the new 2022 RMD tables. 
  • For additional complexity, the IRS has waived the 2021-2023 RMDs due from Garrett whether he is treated as a designated beneficiary or a successor beneficiary. Whether these waivers continue for 2024 is anyone’s guess, but the IRS would probably have to finalize the Regs by the end of Sept or they will probably have to continue the waivers. What does not change is that Garrett must drain this inherited IRA by 2030, but the annual RMDs (disregarding the recent waivers) will be much lower if Rupert defaulted to ownership making Garrett a designated beneficiary.
  • Rupert may want to take some voluntary distributions to prevent a large total distribution in 2030.

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