Question

Inherited IRA 2020 -did I miss rmd

Forum|Forum|3 years ago
May 21, 2023
2 replies
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My parent died in late 2020. I inherited an IRA I either inherited it in late December 2020 or early 2021. I was under the impression that it was that point subject to the 10 year rule, but I was not subject to RMD’s based on, my life expectancy or anything else. They had already begun taking RMD’s did I miss taking required minimum distributions?

Thanks in advance

Not A Product Question

Critter-3

If the parent was taking RMDs then you must also take them but you also must deplete the account within 10 years in some fashion. So the custodian is correct.

F

Fldavem1Author

So I’m going to need to take a back-RMD for 2022 AND pay a fine?

Follow up question: the RMD is based on the IRS table for my age (60) correct?

Critter-3

Talk to the IRA custodian.

D

dmertz

Employee

Because your parent died in 2020, you inherited the account in 2020.

Due to the effects of COVID on the economy, RMDs for 2020 were waived.

You are subject to the 10-year rule, requiring that the IRA be completely drained by the end of 2030.

Because your parent died after their required beginning date for RMDs, you are also required to take annual RMDs based on your life expectancy. However, due to conflicting information provided by the IRS prior to March 2022, the IRS has waived the penalty for failing to take beneficiary RMDs for 2021 and 2022 for those subject to the 10-year rule. Your life-expectancy factor is from the Single Life Expectancy table based on your age in 2021, reduced by 1 for each subsequent year, so if you were age 58 on your birthday in 2021, your life-expectancy factor for 2021 was 28.9, so the factor for 2023 would be 26.9. (If you were instead age 60 in 2021, your life-expectancy factor for 2021 was 27.1, making the factor for 2023 be 25.1.)

The IRA custodian might be able to calculate your beneficiary RMD, but they are not required to do so even if you ask.

N

NCPERSON1

@Fldavem1

<<so I’m going to need to take a back-RMD for 2022 AND pay a fine?>>

while there is no penalty as explained above, that also means there is no incentive to amend and take a 2022 RMD.. (in fact if you were to call the custodian today and try to do so, it would be reported as part of 2023 in any event).

So you are 'in the clear' for 2021 and 2022.... just have to begin taking RMD's in 2023 and have 8 years to do so (last one in 2030 to liqudate the account).

Best to come up with a strategy to spread out these RMDs based on your own personal situation. Since you are just 60 now, you may not be familiar with IRMAA which is a "stealth tax" added to your Medicare premiums and is based on your income. Your income could increase significantly in the last 3 years (age 65) as you attempt to liquidate the inherited IRA. If you don't have the right strategy over the next 5 years, that can increase your Medicare premiums for a few years.

Remember it's a required MIMIMUM distribution requirement; it's not a required MAXIMUM distribution requirement.

Also, the additional income from the IRA distrributions could also cause more of your social security to be taxable

Taking more out beyond the minimum requirement in the early years can limit hitting IRMAA and reduce how much of social security is taxable. it simply takes some planning and thought. EVeryone's situation is unique.

this is a good website that explains IRMAA and its implications.

https://thefinancebuff.com/medicare-irmaa-income-brackets.html

F

Fldavem1Author

So now I went to look at the RMD life expectancy schedule and came across the following, which is what originally made me think I didn’t need RMDs but just to deplete the account within 10y. Again, I’m not generally of RMD age (60) but they were:

https://www.irs.gov/publications/p590b#en_US_2022_publink100090130

10-year rule.

The 10-year rule requires the IRA beneficiaries who are not taking life expectancy payments to withdraw the entire balance of the IRA by December 31 of the year containing the 10th anniversary of the owner’s death. For example, if the owner died in 2022, the beneficiary would have to fully distribute the IRA by December 31, 2032. The beneficiary is allowed, but not required, to take distributions prior to that date.

So I don’t need to take RMD? Just seeing conflicting information! Very confused.