Extension of RMD relief for IRA Designated Beneficiaries
- My understanding is the recent IRS Notice 2024-35, extends the RMD relief for a 4th consecutive year to both Designated Beneficiaries of those who the original IRA owner died after 2019 along with a successor beneficiary of a Designated Beneficiary. But does this mean the RMD is still required but no penalty is assessed. For example, IRA owner dies 2021 and beneficiary son, a Designated Beneficiary, has not taken an RMD from this inherited TIRA for 2022, 2023 but he’d already taken the 2024 RMD March 25. If the RMD still applies, he cannot rollover the withdrawal back to the inherited IRA? But if the entire RMD is waived by the IRS for 2024, he is still within the 60 day rollover period as he has not done a rollover in the past 12 months. Correct?
- A successor beneficiary of a Designated Beneficiary must ‘step-in’ to the DB’s 10 year period and continue it as though the DB had not died. So if the DB was in year #4 and dies after taking that year’s RMD based on his life expectancy, the successor must ‘step-in’ and resume at minimum the RMDs for the remaining 6 years? But does the Successor continue the life expectancy of the DB or use their life expectancy?
Thanks
Permalink Submitted by Alan - IRA critic on Mon, 2024-05-13 23:06
Hi Bruce. The IRS has not really clarified if these waived RMDs will have to be made up, but knowing they will effectively be made up before the end of 10 years anyway, no one believes that the IRS is going to require a specific make up distribution for any of the waived penalty years. As for rolling back a distribution that was not an RMD, because a non spouse beneficiary cannot roll back any distribution unless Congress specifically makes an exception (as they did with the CARES Act in 2020) a beneficiary that took a distribution after 2022 cannot roll it back.
A successor beneficiary never uses their own LE, therefore their age and attributes (eg disabled) are irrelevant. If the DB that passed was under the 10 year rule, the successor must continue the DB’s RMD schedule and also drain the inherited IRA in the original 10 years. However, it is still more common for a successor beneficiary to inherit from a pre Secure DB taking LE (aka stretch distributions), under which the successor gets a new 10 year rule, but still must continue the RMD schedule of the DB.