Can I Take All of My RMDs From Just One of My Inherited IRAs?

Thursday, September 24, 2015

By Sarah Brenner and Beverly DeVeny
Follow Us on Twitter: @theslottreport

This week’s Slott Report Mailbag looks at QLACs (qualified longevity annuity contracts) and whether an inheritor of several IRAs can take all of his or her RMDs (required minimum distributions) from one of the inherited IRAs. As always, we recommend that you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.

1.

Are all qualified plans available for the QLACs? If so, can you mix IRAs, 401(k)s and profit sharing plans to reach the max of $125,000 as long as the prior December 31 value meets the 25% requirement?

Answer:
QLACs can be purchased with IRA, 401(k), 403(b) and governmental 457(b) plan funds. You can mix retirement plans as long as you follow the QLAC rules. You can invest no more than the lessor of 25% of your retirement funds or $125,000 in QLACs. The $125,000 overall limit is fairly straightforward. Simply put, no matter how much money you have in retirement accounts, you cannot use more than $125,000 of those funds, in total, to purchase a QLAC. The 25% limitation is more complicated. The 25% limit is applied to each employer plan separately, but in aggregate to IRAs. For IRAs, the 25% limit is based on the total fair market value of all non-Roth IRAs, as of December 31 of the year prior to the year the QLAC is purchased. The fair market value of any QLAC held in an IRA is included in that total. Unlike IRAs, the 25% limit applies separately to each employer plan. The 25% limit is applied to the balance on the last valuation date.

 

2.

Can a non-spouse inheritor of several traditional IRAs, all inherited from the same person, take all of the RMDs from just one of the inherited accounts? What if the accounts were inherited from different (non-spouse) people?

Thanks for all of your help.

John

Answer:
A non-spouse beneficiary may aggregate RMDs from several inherited traditional IRAs (including SEP and SIMPLE IRAs) and take the total RMD amount from one inherited IRA, if the IRAs were all inherited from the same deceased IRA owner. If the IRAs were inherited from different deceased IRA owners, the beneficiary may not aggregate the RMDs. Also RMDs from inherited traditional IRAs may not be aggregated with RMDs from inherited Roth IRAs, even if the beneficiary inherited all the IRAs from the same deceased IRA owner.
 

Receive Ed Slott and Company Articles Straight to Your Inbox!
Enter your email address:

Delivered by FeedBurner

 

Post Views: 29
Posted in: , , , ,

Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to [email protected] for approval.

For white papers/other outflow pieces:

Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:

Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:

Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at [email protected] or (516) 536-8282 with any questions.