Thanks for the explanation.
In the scenario of "no designated beneficiary" Post-RBD (e.g., the decedent's estate or a trust that does not conform to the requirements above), RMDs must still be distributed and calculated using the decedent's life expectancy in the year of death, reduced by one each subsequent year. The 5 year rule would not apply Post-RBD based on 401(a)(9)(B)(ii):At least this is how I interpreted the relevant regulations. Perhaps others will disagree with my interpretation.5-Year Rule For Other Cases — A trust shall not constitute a qualified trust under this section unless the plan provides that, if an employee dies before the distribution of the employee's interest has begun in accordance with subparagraph (A)(ii), the entire interest of the employee will be distributed within 5 years after the death of such employee.
I am still puzzled how if there is no designated beneficiary (or a non qualifying trust) but decedent dies after RBD, then the IRA is distributed using decedent lifetime stretch, which could be up to 20 years? But if it is a designated beneficiary it has to be liquidated in 10. That makes no sense to me.
Also, if there is no designated beneficiary, where does the IRA reside post death? Within the estate for decades in the future?
I must be missing something.
Edit: this bears out what you are saying
https://www.schwab.com/learn/story/inhe ... ur-options
6. Distribute assets received through a will or estate
Generally required by those who are not designated beneficiaries
If you're not listed as a designated beneficiary on the retirement account, you likely inherited the account via a will or the estate. In this situation, the age of the original account owner will determine how you must distribute the assets:
If the original owner was under the RMD age, the 5-year rule applies. Under this rule, you won't have an annual RMD, but you must withdraw all assets within five years of the owner's death or else pay a penalty on any remaining amount.
If the original owner was of RMD age, you generally must take RMDs over the remaining life expectancy of the original account owner.
It just seems odd to me that the distribution period of an Ira inherited through an estate may be longer than that of a designated beneficiary.
Edit 2:
This also says something similar but also says even though the IRA can maintain decedents stretch, the IRA custodian may only make distributions to the estate and do it lump sum.
https://priowealth.com/there-is-no-bene ... -now-what/
So, if you inherit the IRA through the estate, you cannot use your own life expectancy to calculate required distributions. If the IRA owner died before April 1 (his/her required beginning date) of the year after he or she turned 70 ½, you must empty the IRA in five years. If he or she died after the April 1 required beginning date, then you can stretch distributions over the ACCOUNT OWNER’S remaining life expectancy.
However, the ability to stretch distributions when the estate is the beneficiary may not be an option for you. Many IRA custodians will only make payments to the estate NOT to the beneficiaries of the estate. While IRS allows an estate to assign or transfer the IRA out of the estate to a properly titled inherited IRA for estate beneficiaries, many IRA custodians will not do this, instead paying the entire IRA balance to the estate. This is a taxable distribution and cannot be undone.
Statistics: Posted by JBTX — Sun Jul 28, 2024 1:38 am