Inherited IRA

[Matt Sova]

I ran into something that has never occurred for me before.

Woman (A) had an IRA and was taking RMD. She died in 2004. Beneficiary (B) is in her 50's and was planning on taking out the entire amount within 5 years. To date no distributions were made.

(B) died in January 2007, Husband (C) inherits (B)'s beneficiary IRA.

Can (C) take out the amount over his life expectancy? Does he have to take out the balance by the end of 5 years after (A)'s death? Or is there some other distribution period that has to be used?

This person likes to have IRS Publications or Code Sections, so if you have that with your answer it would be greatly appreciated.

[Snaggletoof]

Wake the Dead

good grief, Sova is back. Don't stay away so long, and don't put any money on Michigan to come within the 11 pt underdog spread against Florida!!

I always felt like if Matt didn't know, no one did. Sure enough, I don't think this question has a straightforward answer, and might not even be researchable. So this is opinion only, but is how I think a ruling might be.

If I understand it, an elderly person was taking RMD from his IRA and dies, leaving the IRA to his spouse. The spouse has to do something with this thing within 5 years, and for a brief duration does absolutely nothing before she herself dies. The IRA is now left to yet a "secondary beneficiary." (I don't know whether I've just coined a word of whether there is such a thing)

I believe all the terms and requirements originally incumbent upon the spouse now cleave to this new beneficiary. Question now becomes, does he get a "new clock" for his five years, or does the "old" clock for the first heir keep running?

Again, I don't know where to research for precedent here, but I do think he gets a fresh clock. Why? Because the 5-yr rule applies to the estate and beneficiaries and not the decedent.

[Bees Knees]

Issue 1: Woman A and Beneficiary B are not husband and wife. Woman A was already receiving RMD. Therefore, Beneficiary B had to continue to receive RMD under the longer of the beneficiary’s single life table, or the decedent’s single life table. The wait 5 year before taking anything option is not available when the decedent was already taking RMD (see TTB page 13-24).

Issue 2: Since Beneficiary B was not a spouse of Woman A, she could not treat the IRA as her own. She could only take the entire distribution in the year of Woman A's death, or leave it in Woman A’s name and continue to take RMD. Therefore, when Beneficiary B died, her husband could not treat the IRA as his own either. However, as a secondary beneficiary, he can continue to take RMD under the longer of Woman A’s single life table or his single life table.

I would look into the number of years RMD was not taken and get that fixed before trying to continue to take RMD over the beneficiary’s single life table.