Trying to understand how distributions for an Inherited IRA work related to someone passing away in 2020 or later, with multiple non-spouse beneficiaries.
If the original IRA owner died on or after January 1, 2020
The SECURE Act requires beneficiaries to withdraw all assets from an inherited IRA or 401(k) plan by December 31 of the 10th year following the IRA owner’s death. Exceptions to the 10-year rule include … irrelevant stuff …
If you are listed as a nonspouse beneficiary along with one or more other beneficiaries, it’s important to separate your portion of the decedent’s IRA in your name and then complete your first RMD by December 31 of the year following the original IRA owner’s death. If you don’t meet this deadline, your RMD calculation will be based on the oldest beneficiary’s life expectancy. If that person is older than you are, you will need to take a larger distribution.
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Until that last paragraph, it’s consistent with what I see elsewhere – take everything within 10 years, however you choose. Is there a requirement, in a multiple beneficiary situation (say two children) for each to take a distribution in the first year?
My two cents is that I am pretty sure that the new rules say you have to take it all within 10 years, but I don’t think there are any RMDs required. I very much could be wrong with that so check in on the other board. Many pros there.
My two cents is that I am pretty sure that the new rules say you have to take it all within 10 years, but I don’t think there are any RMDs required. I very much could be wrong with that so check in on the other board. Many pros there.
My condolences.
IP"
I am not a tax pro either, but my understanding matches IP’s understanding and I second her response entirely.
in same boat here. I spoke with schwab on this last week, the only requirement is to take it all within 10 years. I had thought I also read something about minors that it’s 10 years once they turn 18, but I can’t find that anymore. my 3 kids received some from when my father-in-law passed, so we are considering taking out some each year, as they have no tax to pay, vs. letting it grow for 10 years then taking it out when they will be working.
But to answer your questions, no RMDs each year, just full liquidation within 10 years.
Will the IRS actually know when those 10 years has passed? I don’t think financial institutions (mine isn’t) are going to be responsible for tracking the RMDs on these as they have in the past since it was an annual calculation as well as an annual requirement.
Closest comparison we have are the previous requirements on cashing in a non-qualified annuity within five years of inheritance. Anyone have experience with that process and/or know how the IRS tracks such? Perhaps the insurance companies keep the clock on that one.
1. Will 1099s now track the DoD for inherited IRAs?
IIRC, and my inherited IRA was grandfathered from the 10 year rule, the DoD is part of the titling of the inherited IRA and has always been tracked by the IRS. I have to take RMDs from this account even though I am not 70.5 or 72, the mandatory RMD age then and now.
The DoD is part of the titling of the inherited IRA and has always been tracked by the IRS.
I don’t think that is valid. DoD is not part of the titling at my firm. Heck, we don’t even know the DoD on an inherited IRA when it is opened (not a required data entry item). It is an additional process that we complete AFTER account opening.
I don’t think that is valid. DoD is not part of the titling at my firm. Heck, we don’t even know the DoD on an inherited IRA when it is opened (not a required data entry item). It is an additional process that we complete AFTER account opening.
Then you must not work for Vanguard. I had to look up Dad’s DoD on the obituary to make sure I provided the correct date.
A quick Google comes up with:
3. Title the new IRA correctly Setting up the inherited IRA correctly is an important step. Inherited IRAs must contain the name of the original IRA owner (the deceased) and indicate that the IRA is inherited. For example, John Doe Jr. Beneficiary IRA, John Doe Sr. deceased 6/1/2020. Only the spouse of the deceased can roll over an inherited IRA into their name. Otherwise, an inherited IRA must always be kept as a separate account.