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My wife just inherited an IRA from her late Mother. How long does my wife have to transfer the funds from Mom's IRA account to her newly created Inherited IRA account?

Forum|Forum|2 years ago
December 15, 2023
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Mom already took her RMD for 2023. Going forward, under the 10 year rule, does my wife have to take RMD's based on her own life expectancy or, if she wanted to, could she wait until year 10 to withdraw all of funds? Thank you all !

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Best answer by Opus 17

The IRA custodian needs to be notified to set up an IRA that will be titled something like "Jane Doe as beneficiary of Mary Smith". I am not aware of a specific time frame, but Jane can't take any withdrawals until the ownership is changed, and Jane's tax obligations are not changed or delayed if she delays the name change.

Since Mary was past her RMD beginning date, Jane is required to take RMDs based on Jane's life expectancy, starting in 2024. Jane can, of course, withdraw more than the minimum amount if she wants to. Jane is also required to completely empty the account within 10 years. (In other words, both the RMD and 10 year closeout rules apply.) Note that the RMD rule is not currently written in IRS publication 590-B, because the IRS has not finalized the rule. The IRS will not penalize anyone who failed to take an RMD in 2023 or earlier, but they expect to enforce the rule beginning in 2024.

While Jane could wait 9 years to withdraw most of the money (after taking the RMDs) that could result in a high tax burden in the 10th year. Jane, her spouse, and their financial advisors may want to look over all the facts and circumstances to plan the best way to manage this money.

O

Opus 17Answer

Employee

The IRA custodian needs to be notified to set up an IRA that will be titled something like "Jane Doe as beneficiary of Mary Smith". I am not aware of a specific time frame, but Jane can't take any withdrawals until the ownership is changed, and Jane's tax obligations are not changed or delayed if she delays the name change.

Since Mary was past her RMD beginning date, Jane is required to take RMDs based on Jane's life expectancy, starting in 2024. Jane can, of course, withdraw more than the minimum amount if she wants to. Jane is also required to completely empty the account within 10 years. (In other words, both the RMD and 10 year closeout rules apply.) Note that the RMD rule is not currently written in IRS publication 590-B, because the IRS has not finalized the rule. The IRS will not penalize anyone who failed to take an RMD in 2023 or earlier, but they expect to enforce the rule beginning in 2024.

While Jane could wait 9 years to withdraw most of the money (after taking the RMDs) that could result in a high tax burden in the 10th year. Jane, her spouse, and their financial advisors may want to look over all the facts and circumstances to plan the best way to manage this money.

G

genelawson566Author

I have searched several sites, including the IRS, and cannnot find a "time limit" on how long one has to convert/transfer the funds from the deceased IRA owner account into the new inherited IRA account? Strange, although I suppose there is a limit by proxy in that the new owner, like you say, must start taking RMDs and the new owner can't do that until they have established the new account.

OK, thanks for info on RMDs. I noticed the IRS published new life expectancy tables effective 2023 for Inherited IRA owners so, again, like you say, they probably will , finally, issue a rule stating RMDs are mandatory.

Thank you.