Successor Beneficiary Case
An IRA account holder passed away after Jan 1, 2020. The IRA account holder had already reached his RBD for his RMDs. The beneficiary of his account was older than him. The beneficiary chose to use her life expectancy for the RMD calculations so that she would not have a large lump sum distributed at the end of her LE calculation if she lived long enough.
The beneficiary passed away in during the 4th year after the year of the original IRA owner’s death. How will the successor beneficiaries calculate their RMD amounts in the year of the original beneficiary’s death and in subsequent years?
Permalink Submitted by Alan - IRA critic on Tue, 2025-06-24 14:50
I assume that the original beneficiary was a non spouse and was also an EDB due to being not more than 10 years younger than decedent. If so, that non spouse’s beneficiary RMDs are determined by the longer of the decedent’s single LE or the beneficiary’s LE.
The successor beneficiary steps into the shoes of the deceased beneficiary and also becomes subject to the 10 year rule if the annual RMDs do not drain the account before then. The successor beneficiary can use the decedent’s age for RMDs like the deceased beneficiary could have. The divisor would be based on the age of the decedent in the year of death, and reduced by 1.0 for each year thereafter. While the deceased beneficiary may have taken out more than that, this does not require the successor to do so. The successor can take out as little as the divisor based on the age of the original owner or any amount more than that if they wish.
The age and status of the successor beneficiary is immaterial for RMD purposes.
Permalink Submitted by George McCabe on Tue, 2025-06-24 15:18
Alan,
You helped our team with the initial calculation for the original beneficiary. You had mentioned that even if the older beneficiary used the younger IRA owner’s LE, we would still need to track the older beneficiary’s LE and distribute the entire account balance in the final year of the beneficiary’s LE even though the annual RMDs could be calculated on the longer life expectancy of the younger decedent.
If the successor beneficiary needs to “step into the shoes” of the deceased beneficiary, do they still have to distribute the entire account balance in the final year of the beneficiary’s LE?
Permalink Submitted by Alan - IRA critic on Tue, 2025-06-24 16:01
This confusing rule was changed from that of the proposed Secure Act Regs. The final Regs are summarized in the following paragraph copied from the federal register, p 58897:
Permalink Submitted by George McCabe on Tue, 2025-06-24 16:40
Thanks for clarifying. Since the original IRA owner died in 2021 and the original beneficiary died in 2025, the successor beneficiaries have to continue on the original beneficiaries 10 year clock, correct?
Permalink Submitted by Alan - IRA critic on Tue, 2025-06-24 17:52
No, since the original beneficiary was an EDB, they were not subject to the 10 year rule. Even though they used the decedent’s remaining LE for beneficiary RMDs they are still an EDB. The 10 year rule starts in 2025 and the successor beneficiary has until 2035 to drain the inherited IRA, although if the original owner’s single life divisor reaches 1.0 or less before that year, then the inherited IRA will have to be drained in that year and will not reach year 10.
Note: Had the first beneficiary not been an EDB (more than 10 years younger), they would have been subject to the 10 year rule ending in 2031 and their own age for RMDs in years 1-9, and when they passed the successor beneficiary would still have had to drain the inherited IRA in 2031 and continue the first beneficiary’s RMD schedule prior to 2031.
Permalink Submitted by George McCabe on Tue, 2025-06-24 18:51
Thank you.