Clarification ten year rule applies and no RMDs required

Submitted by John Mlodynia on Tue, 2024-05-07 16:05

IRA owner passed away in 2023 and was receiving RMDs.  IRA had 3 beneficiaries (the deceased children).

10 year rule applies for all beneficiaries?

Are RMDs required for beneficiaries in year 1-9 using the Single Life Expectancy Table and the beneficiaries age?

Or can the Inherited IRA remain untouched so long as it is liquidated by end of tenth year?  Am I missing anything?

IRS.gov…

“The 10-year rule applies if (1) the beneficiary is an eligible designated beneficiary who elects the 10-year rule, if the owner died before reaching their required beginning date; or (2) the beneficiary is a designated beneficiary who is not an eligible designated beneficiary, regardless of whether the owner died before reaching their required beginning date.“



Submitted by Alan - IRA critic on Wed, 2024-05-08 15:39

Yes, the 10 year rule applies here, except to any child who might be disabled or chronically ill. If separate inherited IRA accounts are established by the end of 2024, each beneficiary can use their own single life expectancy for annual RMDs in years 1-9 of the 10 year rule period (2025-2033). For 2024, any of the beneficiaries in any combination must complete the decedent’s RMD if decedent did not do so. The IRS is not expected to waive the beneficiary annual RMDs after this year.

Submitted by John Mlodynia on Wed, 2024-05-08 16:28

Seems to mostly concur with my IRS website readings, except the dates are a year behind?  Typo?

The person died in year 2023, so no RMD would have been possible by that person in 2024.  Separate Inherited IRA accounts have been established in 2024.  My timeline looks like this:

2023-RMD of deceased owner must have been made.

2024-2032 (1-9 after death)-each individual Inherited IRA account owner calculates an RMD based on Table 1 Single Life Expectancy For Use by Beneficiaries.  Subtract 1 from Single Life Expectancy for each year after the first.

December 31, 2033 (tenth year after death) all Inherited IRA Accounts must be exhausted.

 

Submitted by Alan - IRA critic on Wed, 2024-05-08 18:04

Yes, your figures are correct except that the IRS has waived the penalty for the 2024 annual beneficiary RMD within the 10 year rule. They are inferring that 2024 is the last such waiver year and beneficiary RMDs will therefore be required starting in 2025. If no distribution is taken in 2024, the divisors are still determined as if the 2024 distribution had been taken with 1.0 reduction from the would be 2024 divisor applying in 2025, etc. The inherited IRAs must be drained by the end of 2033.

 

 

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