RMDs Do Apply to Inherited IRAs says IRS

[SecondCor521]

DM passed away on 2-8-20.

Then you're subject to the new rules that are being discussed in this thread.

My opinion (SGOTI YMMV etc) is that you have until 12/31/2030 to drain it to zero on whatever schedule you wish.

 

[beernutzbob]

My mother passed in January 2020 and I and 3 siblings inherited her TIAA 403b account. The documentation I received from TIAA at the time stated that I had 10 years to empty the account and gave several options for doing so including 1/10th the first year, 1/9th the second, etc., as well as taking it all in year 10.

 

[Nature Lover]

Here's a story that quotes an IRS representative on the subject. It's from marketwatch, who I typically view as clickbait, but it quotes an IRS spokesman:

https://www.marketwatch.com/story/t...rited-ira-rule-here-are-the-facts-11619205891

"The examples are incorrect, said an IRS spokesman. The agency plans to revise the publication to reflect the correct information, which is that beneficiaries have 10 years to withdraw the money in whatever fashion they’d like. The agency stated in other parts of the current 590-B document that inheritors have the 10 years to distribute the money."

I guess we should keep watch for the revised publication.

 

[USGrant1962]

IRS corrected their errors in Pub 590-B. They deleted the text and example in the first posting, and clarified regarding the 10-year rule that:

The beneficiary is allowed, but not required, to take distributions prior to that date.

Of course, per Ed Slott it appears they managed to complicate when the 10 years is up!
https://www.investmentnews.com/irs-clarifies-the-10-year-rule-but-with-added-confusion-206962

From the link:

Bottom line: The IRS did correct and clarify the 10-year rule in some respects but has left us wondering about when that 10-year term actually ends. The good news is that ending date for most new beneficiaries is still around 10 years away, so we have time for more clarification. Once again — stay tuned. This still hasn’t ended.

Here's the Pub: https://www.irs.gov/pub/irs-prior/p590b--2020.pdf

 

[SecondCor521]

IRS corrected their errors in Pub 590-B. They deleted the text and example in the first posting, and clarified regarding the 10-year rule that:



Of course, per Ed Slott it appears they managed to complicate when the 10 years is up!
https://www.investmentnews.com/irs-clarifies-the-10-year-rule-but-with-added-confusion-206962

From the link:



Here's the Pub: https://www.irs.gov/pub/irs-prior/p590b--2020.pdf

On when the 10 years ends, if you go dive into the actual text of the law and follow all the convoluted stuff therein - as I did - it's perfectly clear that the "10 year" period ends at the end of the year which contains the 10 year anniversary of the date of death. So if someone dies today (5/28/21), then you have until 12/31/31 to empty an IRA that you inherit from them (assuming, of course, that the various exceptions don't apply to you).

ETA: The Ed Slott article says the confusion is around cases that I think are not the norm (minors inheriting and people who inherit an inherited IRA), so while that confusion still may exist, I really don't have to worry about it and I doubt most here do. These cases fall under the "various exceptions" parenthetical remark in my previous paragraph.

Don't ask me how to handle the situation where the original IRA owner and the inherited IRA owner or both are not calendar year taxpayers. That's very rare and beyond my pay grade. ETA: Even the IRS' revised Pub 590B appears to ignore this scenario (or the law ignores it, which I doubt).

 

[ocean view]

On when the 10 years ends, if you go dive into the actual text of the law and follow all the convoluted stuff therein - as I did - it's perfectly clear that the "10 year" period ends at the end of the year which contains the 10 year anniversary of the date of death.
<snip>
Don't ask me how to handle the situation where the original IRA owner and the inherited IRA owner or both are not calendar year taxpayers. That's very rare and beyond my pay grade. ETA: Even the IRS' revised Pub 590B appears to ignore this scenario (or the law ignores it, which I doubt).

In the corporate tax world, when tax years don’t align (during a merger, for example) a short tax year is created to bridge the gap. And although the short tax year is less than 365 days, it consumes a full year of the life the item being carried over, such as a business credit. I would assume it would work similarly for individuals.

In the text of the law did it simply say “ten years” or did it say “ten tax years”?

 

[SecondCor521]

In the corporate tax world, when tax years don’t align (during a merger, for example) a short tax year is created to bridge the gap. And although the short tax year is less than 365 days, it consumes a full year of the life the item being carried over, such as a business credit. I would assume it would work similarly for individuals.

In the text of the law did it simply say “ten years” or did it say “ten tax years”?

It just says ten years. The SECURE Act itself bases the 10 year rule on an existing five year rule in 26 USC 401(a)(9)(B)(ii) (https://www.law.cornell.edu/uscode/text/26/401). That text just says "five years", but I think the context implies calendar years, because Pub 590B says December 31st when talking about both rules (page 11 at https://www.irs.gov/pub/irs-pdf/p590b.pdf), and usually the IRS is pretty careful to note when tax years come into play.