Inherited IRA

Forum|Forum|3 years ago
June 23, 2023
2 replies
65 views

My mom died in 2021 at the age of 94 and I was 67.

Her 2021 RMD was distributed to me because she hadn't taken it yet.

I did not take a distribution in 2021 or 2022.

I'm totally confused about the rules!

Do I -

1. Use the 10 year rule and deplete the account any way I choose but have it completely depleted by 2031?

2. Take RMDs starting in 2023 based on my life expectant using the IRS tables?

3. Some combination of the two?

Thanks for anyone's help clarifying!

Marilyn

Not A Product Question

Opus 17

Level 15

Because you are not a ~~qualified~~ "eligible designated" beneficiary, you must distribute the full amount within 10 years (by 2031).

You are also required to take RMDs during the 10 year period. This rule is not written in the current (2022) version of publication 590-B because the rule was not finalized for the 2022 tax season, but a final rule is coming. (The IRS will not penalize you if you failed to take an RMD in 2021 or 2022, because the rule was not final at the time.)

So you should plan to take an RMD (or more) this year and in the future. The RMD is calculated according to a different formula that @dmertz knows but I don't.

You may want to take more than the minimum so you can spread out the taxes. If you only take the minimum you will have to withdraw a big lump sum in the 10th year and that may have negative tax consequences.

Marilyn227Author

Level 2

Thank you for your response!

Could you explain why I am not a qualified beneficiary? I thought I was.

Opus 17

Level 15

@Marilyn227 wrote:

Thank you for your response!

Could you explain why I am not a qualified beneficiary? I thought I was.

I used the wrong term. I should have said you are not an eligible designated beneficiary.

Eligible designated beneficiaries.

An IRA beneficiary is an eligible designated beneficiary if the beneficiary is the owner's surviving spouse, the owner's minor child, a disabled individual, a chronically ill individual, or any other individual who is not more than 10 years younger than the IRA owner.

If you were an eligible designated beneficiary, you would follow different rules on how and when the IRA must be distributed and how your RMDs are calculated.

Because you are not an eligible designated beneficiary, you follow the 10 year rule. As I mentioned above, the 10 year rule requires that you distribute all the money within 10 years AND that you take RMDs during the 10 year period.

dmertz

Level 15

As Opus 17 indicated, you are subject to the 10-year rule (as you indicted in #1) and, because your mother died after her required beginning date for RMDs, you are also subject to annual RMDs (as you indicated in #2) using the factor from the Single Life Expectancy table based on your age on your birthday in 2022, reduced by 1 for each subsequent year. The penalty for failing to take such an RMD in 2022 (and 2021) was waived by the IRS due to confusing information provided by the IRS prior to the IRS providing the proposed regulations in early 2022 based on the tax-code changes made by the SECURE Act.

The annual distributions are minimum distributions. You may want to take out more than that each year to avoid needing to take a large taxable distribution in year 10. Also, tax rates are scheduled to increase in 2026.