Post RBD Owner with an Older Beneficiary
I have a client who was born 9/7/1931. Her brother passed away 1/17/2021 and she inherited his Traditional IRA. He was born 5/2/1937. The value of the account as of 12/31/2023 is $361,687. Being that she is older than he would have been, would you be able to let me know what her options are in terms of RMDs for 2024?
Also, what would happen if she were to pass away in the next few years? How would RMDs be calculated for her beneficiaries who are in their 50s and 60s?
Permalink Submitted by Alan - IRA critic on Wed, 2024-04-03 21:39
Being older, she is an EDB who can take annual RMDs using the age of the younger owner. That said, the Secure Act Regs also impose a requirement that the inherited IRA must also be drained in the year that the older client would have drained the inherited IRA had her age been used from the start. So more unnecessary complexity. Since she would have been 91 in 2022 (divisor 5.3), the inherited IRA must be drained in 2027 when her divisor drops to .3. Therefore, it might be easier just to use her shorter LE for distributions so it will be clear when the final year arrives. It will also avoid a large distribution in 2027 that might spike her marginal tax rate if she opts for the more equal distributions using her own age. Each of these distributions will exceed the actual RMD for years prior to 2027.