Tax consequences of an inherited-inherited IRA

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misterjohnny
Posts: 122
Joined: Thu Aug 08, 2019 3:21 pm

Tax consequences of an inherited-inherited IRA

Post by misterjohnny »

If an IRA owner dies, and he has already started taking RMD's, the beneficiary of the IRA now has an "inherited IRA" that must be realized as taxable income within 10 years (if it is not a spouse or a dependent child, etc).

Now what happens if the beneficiary dies, the owner of the inherited IRA. Does the beneficiary of that IRA have to realize the money in the original 10 years or does the clock start over?
Alan S.
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Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Tax consequences of an inherited-inherited IRA

Post by Alan S. »

misterjohnny wrote: Mon Jun 10, 2024 6:18 pm If an IRA owner dies, and he has already started taking RMD's, the beneficiary of the IRA now has an "inherited IRA" that must be realized as taxable income within 10 years (if it is not a spouse or a dependent child, etc).

Now what happens if the beneficiary dies, the owner of the inherited IRA. Does the beneficiary of that IRA have to realize the money in the original 10 years or does the clock start over?
If the IRA was first inherited after 2019 and the 10 year rule applies, the successor beneficiary will have to drain the inherited IRA by the same 10 year deadline that the first beneficiary had. There is no additional 10 years. In addition, the successor beneficiary will have to continue the same RMD schedule in years 1-9 that the first beneficiary was using.

But if the first beneficiary is an EDB and taking annual RMDs, upon their death the successor beneficiary will get an additional 10 years, and again will have to continue the annual RMD schedule of the first beneficiary in years 1-9.
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