Under the secure act, do you have to take >

[tulak]

Disbursing the funds would make it taxable to the beneficiaries.

Gill

That’s the piece I was missing. I assumed it would be taxable to the estate. Isn’t that the case for RMDs? How is it reported to the beneficiaries? Or maybe I should say beneficiaries of the estate?

And my apologies if my terminology isn’t a 100%. It’s been almost ten years since I had to deal with this as executor for my mom’s estate. In her case, I seem to recall the IRA did go through probate (no named beneficiaries on the IRA) and then it was split three ways. But it’s been a while, so I don’t remember the details.

 

[gwraigty]

You’re making a distinction where none exists. I understand the difference between a named beneficiary and a devisee from a testamentary estate. Nevertheless, they are both described as beneficiaries. As I’ve seen on Facebook and other forums, your Google search isn’t equivalent to my law degree.

My point, which I perhaps haven't expressed well enough, is that there is definitely a distinction in the procedures for receiving an inheritance. I realize you know this, but for the benefit of others in it's simplest form: A named beneficiary (POD/TOD) makes the claim directly with the financial institution. No probate required. Otherwise, the account has to go through probate or a release from administration for small estates (as state law may allow). That's when an executor/administrator has to take the lead in disbursing the assets to the heirs. I've been through both sides of this and worked with a lawyer when it was required.

It's not automatically payable to the estate. The terms of the IRA agreement may specify a different beneficiary.
Gill

Thank you. I stand corrected. From Fidelity's IRA agreement:

If the Depositor had not by the date of his or her death properly designated a Beneficiary in accordance with the preceding sentence, or if no designated primary or contingent Beneficiary survives the Depositor, the Depositor’s Beneficiary shall be his or her surviving spouse, but if he or she has no surviving spouse, his or her estate.

 

[daveshow]

Can someone answer OP's question? Do they have to take yearly RMD or can they wait the full 10 years and drain the entire amount at that time.

 

[audreyh1]

I’m pretty sure they can wait 10 years and take all at once. Unless they are less than 10 years younger than the deceased in which case they can use an RMD schedule that matches their age and aren’t required to take it all within 10 years.

And it sounds like the 10 year clock starts on Jan 1 of the year after the owner died?

Although the designated beneficiaries may also have to withdraw any remaining RMD during that same year of decease.

I’m not addressing the case where the IRÁ has to go through probate.

 

[Sunset]

I’m pretty sure they can wait 10 years and take all at once. Unless they are less than 10 years younger than the deceased in which case they can use an RMD schedule that matches their age and aren’t required to take it all within 10 years.

.....

So I wonder,
If I'm on my deathbed could I name a beneficiary like a grandchild on this inherited IRA, and not touch it myself, knowing in a couple of years I'd die.
Then the grandchild inherits it and has many many years to draw upon it ?

 

[audreyh1]

So I wonder,
If I'm on my deathbed could I name a beneficiary like a grandchild on this inherited IRA, and not touch it myself, knowing in a couple of years I'd die.
Then the grandchild inherits it and has many many years to draw upon it ?

Your grandchild must draw down the IRA to zero within 10 years, since they are going to be at least 10 years younger than you.

That was the whole point of the change, to prevent stretch IRAs going to much younger beneficiaries over their lifetimes, so they imposed a 10 year rule.

If a designated beneficiary is less than 10 years younger than the owner, they can still use the stretch IRA rules, taking RMDs over their lifetime.

 

[pb4uski]

Can someone answer OP's question? Do they have to take yearly RMD or can they wait the full 10 years and drain the entire amount at that time.

The latter.

 

[Sunset]

Your grandchild must draw down the IRA to zero within 10 years, since they are going to be at least 10 years younger than you.

That was the whole point of the change, to prevent stretch IRAs going to much younger beneficiaries over their lifetimes, so they imposed a 10 year rule.

If a designated beneficiary is less than 10 years younger than the owner, they can still use the stretch IRA rules, taking RMDs over their lifetime.

Oops, I reversed the meaning in my brain. sort of like dyslexia.

 

[SecondCor521]

Can someone answer OP's question? Do they have to take yearly RMD or can they wait the full 10 years and drain the entire amount at that time.

Sometimes I wonder how many people ignore me. Or maybe I'm just not clear enough. I answered the OP's post and your restatement of the question in post #2 on this thread.

Audreyh1 does make a good additional point, which is that there are exceptions to the 10 year rule.

 

[target2019]

I don't see a clear answer with reference. Can I wait til the 10th year and take the entire IRA?

 

[SecondCor521]

I don't see a clear answer with reference. Can I wait til the 10th year and take the entire IRA?

Clear answer from post #2:

"The beneficiaries of the IRA have to remove all of the IRA within 10 years starting on 1/1 of the year after death.

So if Grandpa dies this summer of 2020, he (or his executor) has to take out the RMD for 2020 based on his numbers (age and 2019 ending balance). His beneficiaries must drain their respective inherited IRAs by 12/31/2030, the concluding date of ten tax years starting 1/1/2021."

Clearer answer:

"Yes, you can."

With reference:

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions

 

[target2019]

The first answer does not address the RMD concept for non spouse beneficiary. I think the requirement is no more.

 

[SecondCor521]

The first answer does not address the RMD concept for non spouse beneficiary. I think the requirement is no more.

Ah, now I see.

Yes, my understanding is that either you can use RMDs in some limited cases (already taking them, spouse, beneficiary less than 10 years younger, under 18 when inheriting, disabled) OR you follow the 10 year draining rule.

I don't think the IRS link I provided explicitly points out that you don't need to take RMDs during that 10 year period. It's sort of implied.

ETA:

It looks like it's expressed in HR 1865, Division O, Section 401(a)(1)(H)(ii), (aka PL 116-94) which states

"“(ii) EXCEPTION FOR ELIGIBLE DESIGNATED BENEFICIARIES.—Subparagraph (B)(iii) shall apply only in the case of an eligible designated beneficiary."

Subparagraph (B)(iii) is the existing law which allows a non-spouse beneficiary to take RMDs rather than drain the account within 5 years.

Cite:

https://www.congress.gov/bill/116th...65/text#toc-H2544713764834046B363ABFE2083DC8B
https://uscode.house.gov/view.xhtml?req=(title:26 section:401 edition:prelim)

 

[Al in Ohio]

Why does it always have to be grandpa?

Grandma drove him to drinkin.

 

[ncbill]

Your grandchild must draw down the IRA to zero within 10 years, since they are going to be at least 10 years younger than you.

That was the whole point of the change, to prevent stretch IRAs going to much younger beneficiaries over their lifetimes, so they imposed a 10 year rule.

If a designated beneficiary is less than 10 years younger than the owner, they can still use the stretch IRA rules, taking RMDs over their lifetime.

Sure, in theory.

In practice...sorry to be a cynic, but I've moved an old inherited IRA to a new custodian more than once and every time the new custodian relied entirely on what I told them about: date of death, whether or not I had taken my RMD for that year yet, etc.

So I don't see much of an impediment to moving an inherited IRA under the new rules to another custodian in year 8 or 9 with the beneficiary simply telling the new custodian whatever year of death they wish.

 

[Curmudgeon44]

Sure, in theory.

In practice...sorry to be a cynic, but I've moved an old inherited IRA to a new custodian more than once and every time the new custodian relied entirely on what I told them about: date of death, whether or not I had taken my RMD for that year yet, etc.

So I don't see much of an impediment to moving an inherited IRA under the new rules to another custodian in year 8 or 9 with the beneficiary simply telling the new custodian whatever year of death they wish.

If anyone in their right mind intends to lie about the year inherited, they should be familiar with IRS rules for failing to make a required withdrawal. Unless I am mistaken, they are pretty confiscatory.

You don't want to miss a required distribution. Hope this helps.