The 10-Year Rule and IRA Beneficiaries: Today’s Slott Report Mailbag

By Sarah Brenner, JD
Director of Retirement Education
Follow Us on Twitter: @theslottreport

Question:

Ed,

My client recently passed away at the age of 86 and the beneficiaries were his twin grandchildren who are six years old.  Does their 10-year clock to withdraw the funds start right away, or can they wait until they are 18 years old to start their 10-year clock to withdraw the funds? 

Vivek

Answer:

Hi Vivek,

Your client’s grandchildren would be subject to the 10-year rule under the SECURE Act. The 10-year clock starts in the year after the year of death of the IRA owner. Only minor children (not grandchildren) of the IRA owner are considered to be eligible designated beneficiaries (EDBs). EDBs can take required minimum distributions until they reach the age of majority under state law or when they finish school (up to age 26). Then, the 10-year rule would apply to them, too. However, in this case, the twins are not EDBs.

Question:

I am the executor of my 94-year-old father’s estate.  He died March, 2021.  He had taken $15,000 of his $40,000 RMD before he passed.  My brother and I are listed as beneficiaries on his IRA along with a charity.  The charity received $40,000 in cash as a beneficiary.  So, has my father’s RMD for 2021 been satisfied?  Thanks in advance.

Answer:

The regulations are clear that the year-of-death RMD must be taken. However, it can be taken by any beneficiary. Your father had an RMD for the year of death of $40,000 of which $25,000 was yet to be paid at the time of death. When the charity took the $40,000 distribution, that satisfied the remaining RMD for the year of death and nothing further would need to be taken.