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Given that a traditional IRA owner that died in 2019 (at 95) and had multiple beneficiaries (all people), normally the rules states that the inherited IRA would have to be inherited by all of the beneficiaries by 2020 to allow for each of the beneficiaries to take their RMDs based on their respective ages. If everyone did not officially inherit their IRA in 2020, everyone's RMD would forever be based on the age of the eldest beneficiary.

That's how I understand it.

But since they allowed that you didn't have to take an RMD in 2020 is it possible that all the beneficiaries could also delay actual inheriting of their individual IRAs until 2021?

The goal is to avoid beneficiaries from having to take larger RMDs because not everyone took care of the process to inherit their IRA in 2020.

Any help appreciated! thx

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  • I think you meant "old" enough - yes, 95 – piton Apr 1 at 4:34
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Note this answer is for an individual who died in 2019 and whose beneficiaries have the opportunity to do 'Stretch IRA'. Beneficiaries for 2020 and later decedents are not able to take RMD distributions over the beneficiaries' lifetime.

From: Publication 590-B (2020), Distributions from Individual Retirement Arrangements (IRAs)

It is stated at the beginning.

RMDs not required in 2020. New legislation temporarily waives the requirement to make required minimum distributions (RMDs) in 2020 in response to the coronavirus pandemic. Whether that distribution is one in a series of RMDs or the initial RMD that would be required by April 1 for a taxpayer reaching age 70½ in tax year 2019, no RMD is required.

And in a later section:

RMDs not required in 2020. You are not required to make RMDs in tax year 2020, whether that distribution is one required after the initial RMD in a series of required distributions or the distribution that would be required by April 1 for a taxpayer reaching age 70½ in tax year 2019.

I think the key phrase is "whether that distribution is one required after the initial RMD in a series of required distributions". I interpret that to include inherited IRAs with RMD going to beneficiaries.

So I agree with your interpretation that no RMD is required for 2020. I would make sure that the Beneficiary IRAs are setup promptly as normal tax rules will probably apply for 2021.

Follow up regarding individual beneficiary accounts

Here I'm making the assumption that every other legal requirement was met, and that all beneficiaries are non-spouse individuals.

Q: If not all beneficiary accounts are created by the year after the traditional IRA owner dies do COVID rules change any due dates?

A: Due date for creation was not changed, but the selection of RMD calculation was allowed to be

From: IRS announces rollover relief for required minimum distributions from retirement accounts that were waived under the CARES Act which links to Notice 2020-51

V. OTHER ISSUES

Q–2. For a plan that permits an employee or beneficiary to elect whether RMDs are determined using the 5-year rule in § 401(a)(9)(B)(ii) or the life expectancy rule in § 401(a)(9)(B)(iii) and (iv), does § 401(a)(9)(I) extend the time for making the election?

A–2. Yes, if a plan permits an employee or beneficiary to elect whether the 5-year rule or the life expectancy rule applies in determining RMDs, then the deadline for making that election typically would be the end of calendar year following the calendar year of the employee’s death. For example, if a 50-year-old employee in a plan providing the election described in § 1.401(a)(9)–3, Q&A–4(c) died in 2019 with his sister as his designated beneficiary, the plan provision would require the election by the end of 2020. However, pursuant to § 401(a)(9)(I), that type of plan may be amended to permit the extension of the election deadline to the end of 2021.

Q–6. Besides the extensions provided in Q&A–2 and Q&A–3 of this notice and the rollover guidance provided in section III of this notice, are any other deadlines extended or rollover requirements modified in light of section 2203 of the CARES Act?

A-6. No, section 2203 of the CARES Act and section III of this notice address only certain deadlines and rollover requirements. Thus, for example, there is no extension of the deadline of September 30 following the year of death in § 1.401(a)(9)–4, Q&A–4 (relating to the determination of designated beneficiaries); the October 31 deadline in § 1.401(a)(9)–4, Q&A–6(b) (relating to the date by which the trustee of a trust that is a plan’s designated beneficiary must provide the plan administrator certain information); or the last-day-of-the-year deadline in § 1.401(a)(9)–8, Q&A–2(a)(2) (relating to the date by which separate accounts must be established). Similarly, if a participant or beneficiary dies in 2020, there is no extension of the 5-year period described in § 401(a)(9)(B)(ii) or the 10-year period described in § 401(a)(9)(H)(i) or § 401(a)(9)(H)(iii), as applicable.

Q: So does that mean that all beneficiaries are stuck with oldest individual beneficiary RMD?

A: Not necessarily:

From: IRS Pub 590B 2020 - Multiple individual beneficiaries

Multiple individual beneficiaries. If, as of September 30 of the year following the year in which the owner dies, there is more than one beneficiary, the beneficiary with the shortest life expectancy will be the designated beneficiary if both of the following apply.

  • All of the beneficiaries are individuals.
  • The account or benefit hasn't been divided into separate accounts or shares for each beneficiary.

So if out of say four beneficiaries, two did create and receive their allotment in 2020, those two may be able to take the RMDs over their respective individual lifetimes. The third and fourth would be limited to a shortest life expectancy RMD (for those two), with those individuals perhaps having RMD penalty (I'm unclear on this point regarding penalties for 'missing/unavailable beneficiaries distributions') in a normal year.

From what I can tell, once the distribution is in a separate designated beneficiary account, its separate:

From IRS Pub. 590B - Separate accounts:

Separate accounts. A single IRA can be split into separate accounts or shares for each beneficiary. These separate accounts or shares can be established at any time, either before or after the owner's required beginning date. Generally, these separate accounts or shares are combined for purposes of determining the minimum required distribution. However, these separate accounts or shares won't be combined for required minimum distribution purposes after the death of the IRA owner if the separate accounts or shares are established by the end of the year following the year of the IRA owner's death.

Given how frequently tax rules change in addition to COVID, the above information should be enough to frame any questions to your decedent's IRA trustee.

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  • Thanks Morrison Chang - I think my wording wasn't that good. What I was really asking was in regard to "establishing" the IRA at a brokerage and whether the "establishment" of the inherited IRA account could be delayed like the RMDs were. – piton Apr 11 at 3:10
  • @piton Updated with what I think you were looking for. – Morrison Chang Apr 11 at 10:43
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    The stretch IRA is dead. A non-spouse beneficiary has to take it all out by the end of the 10 years. – JTP - Apologise to Monica Apr 11 at 13:24

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