RMDs and CRDs under the CARES Act: Today’s Slott Report Mailbag

Thursday, October 15, 2020

By Andy Ives, CFP®, AIF®
IRA Analyst
Follow Us on Twitter: @theslottreport

Question:

An 85-year-old died in 2020 and left his IRA to his 53-year-old son. Father did not take 2020 $107,000 RMD. Does the son have to take it? Does the son have to take anything in first 9 years, including this RMD?

Thank you.

Answer:

The CARES Act waived RMDs for IRAs in 2020. Even if an IRA owner dies in 2020, his year-of-death RMD still falls under the waiver. So, the $107,000 did not need to be withdrawn by the father, and it does not need to be withdrawn by his son beneficiary. The son is now subject to the new 10-year payout rule as dictated by the SECURE Act. He can take as much or as little as he wants each year, so long as the inherited IRA account is emptied by the end of the tenth year after the year of his father’s death. In this case, that will be 12/31/2030.

Question:

I am a subscriber to your newsletter and get a lot of good information from it.  One question I have not found an answer to and hopefully you can help me: Under the CARES Act, can I take a temporary CRD from my Roth IRA and redeposit it within three years?  I am 74.

Thank you,

Ray

Answer:

Ray,

The CARES Act created CRDs, or “Coronavirus-related distributions.” CRDs allow up to $100,000 to be withdrawn from an IRA, Roth IRA or workplace plan. All or a portion of the CRD can be repaid within three years. Taxes due on the original distribution can be paid in year 1 or spread ratably over three years. (If the CRD is repaid, these taxes can be recouped later by filing an amended tax return.) Also, a CRD is not subject to the 10% early withdrawal penalty for those under 59 ½. Regardless of age, if you qualify as an “affected individual” as defined by the CARES, then yes, you can take a CRD from your Roth IRA.

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