Murdock7591 wrote: ↑Sun Oct 09, 2022 2:25 pm
Alan S. wrote: ↑Sun Oct 09, 2022 1:53 pm
Murdock7591 wrote: ↑Sun Oct 09, 2022 12:13 pm
In 2002 my brother and I inherited an IRA from my mother. We have been using the stretch IRA rule since we inherited it. (taking RMDs every year) My brother passed away last year and I inherited his IRA from our mother. (I am the successor) I am also an EDB, since I am not more than 10 years younger than my brother. My understanding is as a successor beneficiary I am strictly bound by the 10-year payout rule. My plan was not to take RMDs from this inherited IRA until the 10th year. Then I got word of this February IRS rule about having to take an RMDs each year (because RMDs were being taken by my brother) and have the account drained by the 10th year.
So with this new recent ruling, do I need to take an RMD this year or am I still able to follow the Congress rules- no RMD and drain by 2031?
A successor beneficiary cannot be an EDB. EDB treatment is limited to designated beneficiaries.
You are subject to the 10 year rule that will require you to drain this successor beneficiary inherited IRA by 12/31/2031. In addition, you must take annual RMDs in years 1-9 if your mother (not your brother) passed on or after her RBD. Her RBD would have been 4/1 of the year following the year that she turned 70.5 or would have. If you have to take RMDs they would be based on what would have been your brother's divisors, and his divisors would have to be reset for 2022 due to the new RMD tables. Once you determine what your brother's divisor for 2022 would have been had he lived, you would use that divisor for your 2022 beneficiary RMD. Finally, if brother did not complete his 2021 beneficiary RMD, you are responsible for completing that.
This response is indicative of how complex the proposed Secure Act RMD Regulations will be.
So if the IRS is delaying the new rules, wouldn't I be subjected to the rules that Congress inacted which state no RMD requirements for a successor beneficiary :
Did the original beneficiary inherit the IRA on or before December 31, 2019? If so, the successor beneficiary will have 10 calendar years following the year of the original beneficiary’s death to completely liquidate the IRA. This 10 year liquidation period will apply to any individual named a successor beneficiary. For instance, if the successor beneficiary is the original beneficiary’s spouse, he or she must liquidate the entire balance of the IRA with the 10 year term.
The successor beneficiary is not required to withdraw a minimum amount each year during the term. She may wait until the very end of the term to liquidate the IRA. The IRS will penalize her if she does not fully liquidate the account by the end of the 10 year term. The penalty will be equal to 50% of the balance remaining in the IRA at the end of the term. The IRS will levy the
You did not indicate that your mother passed after her RBD, but since this would not be an issue if she passed prior to RBD, I assume that she did pass after her RBD, and therefore if the proposed Regs are adopted as issued, you would have to continue the LE RMD schedule used by your brother.
That requirement is also described commented on in the following link from Ed Slott's website:
https://www.irahelp.com/slottreport/suc ... e%E2%80%9D
Notice 2022-53 also states that if you choose not to take these annual RMDs in 2022, the IRS will not pursue the penalty, so you are free not to take an RMD per brother's RMD schedule this year. For 2021, the RMD was brother's LE RMD, and if he did not complete it before passing, you are responsible for completing it. The 10 year rule for you did not start until 2022.
The Notice does not suggest what determination the IRS will arrive at when these Secure Act Regs are finalized. Some possibilities:
1) Your beneficiary RMDs will have to start in 2023. Brother's RMD schedule would apply, your age is immaterial.
2) The IRS relents to those organizations that have contested this entire provision, and you then would have no RMDs until year 10.
3) Your beneficiary RMDs start in 2023, and you are also required to make up the 2022 RMD (this is unlikely).
4) Successor beneficiaries revert to the former (pre Secure rules) in which case you would also have to complete brother's RMD schedule even though designated beneficiaries would not have annual RMDs within the 10 year rule.
Given the overall situation, I have no idea what the IRS will finally decide, and when they will issue the final Regs. If the final Regs include all the overly complex provisions in the proposed Regs, it will only lead to more non compliance of the rules since very few will understand all the issues that must be considered.