I inherited an IRA from my mother in 2020, who was 83 when she died. Can I make use of the "10-year rule", and wait to make withdrawals? Or do I need to make an RMD now?

[NCperson]

@kevermurray 

<<Note the last sentence just above, beginning with the word 'regardless'.  How do you interpret that as having to do yearly RMDs?  Or to emphasize, should I have more than one ?????????>>

That paragraph is solely discussing who is subject to the 10 year rule and NOT who is subject to RMD. 

let's try to break it  down. 

"The 10-year rule applies if (1) the beneficiary is an eligible designated beneficiary who elects the 10-year rule, if the owner died before reaching his or her required beginning date; or (2) the beneficiary is a designated beneficiary who is not an eligible designated beneficiary, regardless of whether the owner died before reaching his or her required beginning date.  "
 
Here is the definition of an Eligible Designated Beneficiary (EDB):

The owner’s surviving spouse
The owner’s child who is less than 18 years of age
A disabled individual
A chronically ill individual
Any other individual who is not more than 10 years younger than the deceased IRA owner

A designated beneficiary is an individual (let's not worry about estate and trusts!) named as a beneficiary on a retirement account and who does not fall into one of five categories of individuals classified as an eligible designated beneficiary (EDB). 

You are a "designated beneficiary" as you do not satisfy any of the requirements of an "eligible designated beneficiary"

Under (1), those that are in one of the 5 categories of "eligible designated beneficaries" have the OPTION to liquidate in 10 years but not the requirement if the Owner died prior to taking their first RMD. 

Under (2), every other individual (the "designated beneficiaries") MUST liquidate in 10 years. And it doesn't matter whether the Owner (your mother) had begun taking RMDs or not. 

does it make sense now?  please post back 

[kevermurray]

I read those two paragraphs at the beginning of page 10, and I read that under the 10 year rule "The beneficiary is allowed, but not required, to take distributions prior to that date."  (The end of the 10 year period.)  I interpret that as meaning RMDs are not required each year.  If the IRS means to say that RMDs are required each year, it is not only not clear, but is is still deceptive.   If they mean that RMDs are required each year, it seems like it would be easy to state, and a good place to do that would be in form 590-B.   

[Opus 17]

@kevermurray 

We already explained this.

1. The current regulation as of today, 12/10/2022, is that RMD‘s are not required for the 10 year rule.

2. As of today, both the current version of publication 590B (which is for the 2021 tax year) and the draft version of publication 590B for 2022, confirm that an RMD is not required under the 10 year rule. The publication follows the regulations as they exist today.

3. The IRS is weeks away from finalizing a new regulation that will require RMD‘s under the 10 year rule.   Under the new regulation, you will be required to take RMD‘s beginning in 2023.

4. Even if the regulation is finalized before the end of 2022, you will not be penalized for failing to take an RMD in 2021 or 2022.

[kevermurray]

Thank you.  Your clarity is refreshing.

[NCperson]

@kevermurray - I found this an easy read.... and the example appears to fit your situation 

https://www.morningstar.com/articles/1125762/who-does-and-doesnt-get-to-skip-rmds-under-the-new-10-y...

[lennar0719]

Do you know, when the Secure act goes into effect, is the RMD based on the original owners date of birth or the person inheriting the IRA (non-spouse adult child)?

Nadine

After reading the Morningstar article noted above I believe the RMD will be based on my life expectancy.  If I am incorrect or there are other findings please respond.

Nadine

[RobertB4444]

The 10-year rule is based on the date of death of the original account holder.  So the 10 years are the 10 years beginning n their date of death.

RMD requirements are based on the birth date of the account holder before they died.  So if they would have been required to take an RMD if they were alive then you as the beneficiary are required to take a distribution as well.

@lennar0719 

[Opus 17]

---

@lennar0719 wrote:

Do you know, when the Secure act goes into effect, is the RMD based on the original owners date of birth or the person inheriting the IRA (non-spouse adult child)?

Nadine

After reading the Morningstar article noted above I believe the RMD will be based on my life expectancy.  If I am incorrect or there are other findings please respond.

Nadine

---

@dmertz can you clarify this?  I'm curious as well.  

[lennar0719]

I have been reading things for the last month regarding this matter and still am confused regarding the RMD. The Morningstar article, from the example, let me to believe it would be based on my life expectancy.  But when I look at the IRS it is unclear.  Vanguard does not support RMD for inherited IRA's and stated I should consult an accountant.  I was hoping someone on these posts would know the answer. 

My mother died at the age of 89 in 2020, her RMD was taken in 2020 as needed.  I am an adult daughter, when the Secure act does go into effect is the RMD based on my mothers age of 89 or mine? It makes a large difference in amount.

[fanfare]

@lennar0719 

IRS Pub 590B where all imaginable scenarios are covered:

"If the owner died on or after his or her required beginning
date (defined earlier) and you are an eligible designated
beneficiary, you must base your required minimum distributions
for years after the year of the owner's death on the longer of:

• Your single life expectancy shown in Table I in Appendix
B, as determined under Beneficiary an individual,
later; or
• The owner's life expectancy as determined under
Death on or after required beginning date under Beneficiary
is not an individual, later."

[lennar0719]

As an adult child I am not an "Eligible" beneficiary from everything I read so unfortunately your explanation is as confusing as everything else I have read.

[fanfare]

You are going to have to liquidate within ten years.

To spread the tax impact most evenly over the ten years,
your divisor should be :   10 - N where N is the number of entire anniversary years gone by.

In other words, with four years gone by, you want to take out one sixth of the IRA in the fifth anniversary year.
If you are a young beneficiary, or even not so young, this rule would generate much larger RMD than the RMD based on Pub590B formulas, regardless of which life time you use.

@lennar0719 

[fanfare]

if the life expectancy is less than 10, don't use my rule

that happens at age 94.

[lennar0719]

So you are saying the life expectancy of a 93 year old is more than 10 years.  Can you tell me where I can see that table.  Today I was looking at some tables and one of them said for someone born in 1930 the life expectancy was 3.59 years?

[fanfare]

IRS Pub 590B Appendix B. Table III

you need the recent edition since the table changed.