Older sister as Beneficiary
Hello and thank you. A younger sister dies this year at age 70. Her beneficiary is her older sister, age 73. As an Eligible Designated Beneficiary, can the older sister choose between 1) the 10-Year Rule period (with no annual RMDs) and 2) a RMDs based on the Single Life Expectancy Table based her sister’s age? The last IRS interpretation of the SECURE Act confuses me on this point. Thanks for any help. Paul McGillivray
Permalink Submitted by Alan - IRA critic on Wed, 2025-06-04 15:04
Because the IRA owner passed prior to RBD, the EDB beneficiary has the option to out of EDB treatment and into the 10 year rule. The election to opt out must be relayed to the IRA custodian no later than the end of the next year following the year of death. Otherwise, the LE RMDs will continue to apply and single life table divisor based on the age of the beneficiary sister attained in the year following the year of death, not the age of the younger deceased IRA owner.
If the election is made, there will be no annual RMDs in years 1-9 of the 10 year rule, but the account must be drained by the end of year 10.
Now, if the younger sister had passed after RBD, the older sister would not have had the option to opt out of EDB treatment, but because sister passed after RBD, the older sister’s annual RMDs would then be based on the age of the younger sister. This can only be done if the owner passes after the RBD and the beneficiary is older.
Permalink Submitted by Paul McGillivray on Wed, 2025-06-04 16:29
Thank you much, Alan. I appreciate the advice. I see where I was confused. Paul