Inherited IRAs and QCDs
Hi, I have a 76 year old client who just inherited an IRA from her brother who was 74 when he passed. He passed 9/2022 and was born 6/18/1950. He would have needed to take an RMD in the year that he passed. My client was born 6/3/1948. We have 3 questions:
- What I have calculated on various websites is that my client, having recevied the IRA finally this March, needs to take an RMD from the account for 2024 based upon her life expectancy due to the fact that she is an eligible beneficiary being a non-spouse but not more than 10 years younger than her brother, actually older. One calculator gave me a 13.8 and the life expectancy tables give me 14.1 for someone age 76 this year. Not sure which we should go with?
- Nothing has been taken from the account since he passed, which means nothing came out for 2023 and I don’t know about 2022 either as I was not the advisor on her brother’s account. The previous advisor did tell me that no RMD was taken in 2023, but they were sorting out his estate so my client didn’t know what she was getting until this year. Does this have a negative impact on her, seeing as how she didn’t even know what she was getting?
- My client has another inherited IRA that we are drawing off of monthly and have been all year that she received from her father, many years ago. If she wanted to do a QCD off the new inherited IRA from her brother, does the fact that she has taken RMDs from her Dad’s IRA all year to herself negate her ability to do so? I wouldn’t think so, but figured I had better check. Her RMD on her brother’s IRA is over 40k, her Dad’s only about 3k. Not sure if they allow the IRAs to be considered separately for the gifting or not. She also has her own IRA that she has to take about 20k gross from.
Thank you for the help!
Amy
Permalink Submitted by Alan - IRA critic on Wed, 2024-08-14 17:51
The dates do not match. If brother’s correct DOB was 6/1950 and he passed in 2022 at age 72, then he passed prior to his RBD, and there is no 2024 RMD required. Further, because he passed prior to RBD, the client cannot use his remaining LE and must use her own attained age in calculating her annual RMDs. Those RMDs should have begun in 2023 if he passed in 2022. If the client was 75 in 2023, the 2023 divisor is 14.8, then 13.8 for 2024, 12.8 etc. In other words, the correct divisor for 2023 then gets reduced by 1.0 for each successive year after 2023. Again, there was no 2022 RMD due.
The fact that she did not know the details does not alter the situation. She should make up the missed 2023 beneficiary RMD and file a 5329 to request the penalty be waived for reasonable cause (eg prior advisor confused). And the 2024 RMD should also be taken this year. Both will be taxable in 2024.
Since she is over 70.5, she can do a QCD from either inherited IRA, best done before the RMDs for the respective inherited IRAs are completed. She is allowed a total of 105k for all QCDs in 2024. Her RMDs for each inherited IRA and her own IRA must all be separately completed. They cannot be combined for the inherited IRAs because they were inherited from different decedents.
Permalink Submitted by Amy Kiley on Thu, 2024-08-15 14:05
Perfect. Thank you. This is exactly why I asked.