Question

Is a non spouse beneficiary of an inherited IRA required to take annual RMDs or can they wait till the 10th year to take distribution?

Forum|Forum|2 years ago
June 21, 2023
2 replies
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N

NCPERSON1

in what year was the IRA inherited?

is the non-spouse beneficiary at least 10 years younger than the prior owner of the IRA?

Was the prior owner required to take RMDs?

A

AK58Author

2022 - non spouse beneficiary is at least 10 years younger, decedent took RMD in 2022 (prior to death in 2022)

N

NCPERSON1

then beginning in 2023 the non-spouse beneficiary is required to take RMDs each year and liquidate the IRA by the 10th year (2032).

depending on the non-spouse beneficiary's financial situation it may behoove coming up with a strategy to smooth out the 10 years of distributions which may far exceed the RMD requirments. Remember RMD is a minimum, not a maximum requirement. Simply taking the RMD each year may leave a large pot of money to distribute in the 10 year and lift you into a higher tax bracket, resulting in more tax over the 10 years compared to a 'smoothing' strategy.

D

dmertz

Employee

The answer is: It depends.

It's reasonable to assume that the IRS will not change from the proposed RMD requirements for this situation.

If the decedent died before the decedent's required beginning date (RBD) for RMDs, no annual RMDs are required under the 10-year rule.

If the decedent died after the decedent's RBD, annual RMDs are required under the 10-year rule. Because the decedent died in 2022, these annual RMDs are based the Single Life Expectancy factor for the beneficiary's age in 2023, reduced by 1 for each subsequent year. Assuming the the decedent was (or would have been) over age 72 in 2022, which is likely because the decedent took an RMD for 2022, the decedent was beyond their RBD and annual RMDs are required under the 10-year rule. (If the decedent was, or would have been, age 72 in 2022, 2022 would have been an RMD year but the death would have been before their RBD.)