Facts:

IRA owner dies in 2020 at age 87, well past their Required Beginning Date (RBD).

Three adult sons are listed as contingent beneficiaries; primary beneficiary was the spouse that pre-deceased the original owner.

All three beneficiaries are currently still alive.

However, apparently, the beneficiaries missed the December 31 separate account deadline under Regs. 1.401(a)(9)-8(a)(1). Meaning, the IRA was never split into separate accounts.

While attempting to get this wrapped up, the original IRA has since been transferred into an “Inherited IRA from IRA of ‘The Estate of [Original Owner] by Bene of [Original Owner]’” at Custodian. It looks like this occurred on or around 10/3 of this year.

Probate has not been opened.

To my knowledge, no distributions or RMDs have been taken from the account.

Questions:

1. Even though the IRA had multiple beneficiaries, do they each still qualify as designated individual beneficiaries?
   1. This is important as (assumingly) no RMDs have been made since 2020 and it would be advantageous to qualify for the recent IRS relief provisions afforded to designated individual beneficiaries but not to nonperson beneficiaries.
2. Does the fact that the original IRA was transferred into an inherited IRA-estate muddy the waters?
   1. Can the account be split and directly transferred (not distributed) to three separate accounts for each of the beneficiaries?
      1. My understanding is that if the account is divided and directly transferred into three separate accounts FBO of the beneficiaries then this transaction may avoid probate (which would be ideal).
   2. Can they keep the 10-year stretch or are they going to be relegated to a 5-year rule?
3. Assuming the account can be split into three separate accounts for each of the beneficiaries, because they missed the 12/31 split deadline, my understanding is that they’ll therefore need to use the single life expectancy (SLE) of the oldest beneficiary for future RMDs. Is this correct?
   1. Or, because of the estate, do they end up having to use the SLE of the original account owner (age 87)?

Best scenario: The account is split equally amongst the three beneficiaries, the 10-year rule applies, they are relieved from penalties for not taking RMDs from 2021-2024, and then the resume taking RMDs using the oldest beneficiary’s age starting in 2025.

OK but not ideal scenario: They end up having to use the 5-year rule and/or original account owners age forcing accelerated payouts.

Worst case: This whole thing is deemed to have been in the estate, which would require RMDs based on the age of 87 and a 5-year distribution. Plus, potentially an estate tax return(s) including begging the IRS for forgiveness on the accumulation tax for 2021-2023 as well as a catchup distribution this year and potentially triggering the opening of probate.