[*]Your annual distributions are spread over your single life expectancy (determined by your age in the calendar year following the year of death and reevaluated each year) or the deceased account holder's remaining life expectancy, whichever is longer.
This is a very fine point that many people (including myself) didn't realize regarding inherited IRAs:
If a non-spouse inherits an IRA, the heir takes their age the year after your death. THAT age is the 'starting point'. The first year that the heir takes their annual withdrawal (the year following your year of death) is a 'normal' withdrawal using the divisor that year.
HOWEVER - each year after that, they do NOT use the IRS tables. Instead, your heir takes that first year divisor and subtracts one from it for each successive year, and uses that number.
Example:
Let's say you pass on in the year 2040. IN the year 2041 (year following your death), your heir is age 50. Using the IRS tables, their divisor would be 34.2.
However, for subsequent years, your heir's divisor for the RMD is as follows:
Year Divisor
2041 34.2
2042 33.2
2043 32.2
2044 31.2
2045 30.2
2046 29.2
2047 28.2
and so on.
For the first few years, it is very close to the IRS tables. However, you can see that as time goes on, the divisor starts to shrink to be (relatively) smaller than the IRS table. At some point, if the heir lives long enough, the divisor essentially becomes very close to 1 (even less than 1 at some point), and will essentially require all of the remaining assets in the IRA to be withdrawn at that year.
That is because the IRS doesn't want inherited IRAs to become some mega source of wealth that is never taxed through multiple generations, and wants to 'force' people to take out the wealth and subject it to income taxes.
