SECURE ACT SUCCESSOR BENEFICIARY RULES AND PAYING BACK CORONAVIRUS-RELATED DISTRIBUTIONS: TODAY’S SLOTT REPORT MAILBAG

Thursday, September 17, 2020

By Ian Berger, JD
IRA Analyst
Follow Us on Twitter: @theslottreport

Question:

Ed and team,

I am sure my question has been asked by others.  Now under the SECURE Act with no more stretch features to an inherited IRA, if a person dies and leaves his IRA to a child and that child waits 9 years and 11 months after the year of death and named his children (taxpayer’s grandchildren) as his successor beneficiaries, do they have only one month to clean out the IRA or does the 10 year period begin all over.

Thanks for your help and keep putting out the good advice

Jay

Answer:

Dear Jay:

Assuming the child is not a minor, then the child is subject to the 10-year payout rule under the SECURE Act. That 10-year period does not start over again for the grandchildren as successor beneficiaries. So, if the child dies 9 months and 11 months after the owner’s death, any remaining IRA funds do have to be paid out to them within one month. On the other hand, If the IRA had been left to a minor child or spouse (or other beneficiary eligible for the stretch), then the grandchildren would have a 10-year payout period.

Question:

Can you take a coronavirus-related distribution (CRD) under the CARES Act from an inherited IRA and pay it back over 3 years? Thanks.

Answer:

The IRS has made it clear that a beneficiary of an inherited IRA cannot usually repay a CRD. There is an exception for spousal beneficiaries who are affected by COVID-19. This is consistent with the rule that nonspouse IRA beneficiaries cannot do rollovers.

Post Views: 12
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.