By Andy Ives, CFP®, AIF®
IRA Analyst
QUESTION:
Good afternoon,
If a client passed this year with four adult children inheriting equally, and each beneficiary is using the 10-year rule, how do they determine yearly required minimum distribution (RMD) calculations? Is it based on life expectancy or on a number that will empty the IRA within the 10 years?
Thank you for your help.
Sherry
ANSWER:
Sherry,
When RMDs apply within the 10-year period (and assuming the four inherited IRAs are properly established), each beneficiary will use his own age to determine the appropriate RMD. Use the beneficiary’s age in the year AFTER the year of death (2025) to determine the initial factor from the IRS Single Life Expectancy Table. Then, subtract 1 from that factor for years 2 – 9 of the 10 years, and deplete the entire account by the end of year 10 (12/31/34). A beneficiary can always take more than the RMD, which could be a wise tax-planning decision.
QUESTION:
My wife’s mom, age 96, died in June and still has about $6,000 in IRA assets. She had been taking required minimum distributions (RMDs). Do we need to take an RMD for her in 2024, or can the remaining funds pass to her beneficiaries?
Thanks,
Michael
ANSWER:
Michael,
All (or whatever portion remains) of your mother-in-law’s year-of-death RMD becomes the responsibility of the beneficiaries. To avoid a late penalty, Mom’s final RMD must be taken by December 31 of the year AFTER the year of death (12/31/25) – this is the new extended deadline. To help streamline tax reporting, a custodian will typically establish an inherited IRA for the beneficiary and pay the year-of-death RMD from that inherited account. Note that if there are multiple beneficiaries, the year-of-death RMD does not need to be spread equally among them. As long as the full amount is taken, the IRS will be satisfied.
The 10-Year Rule and Required Minimum Distributions: Today’s Slott Report Mailbag
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
Investment advisory services offered through Donato Wealth Management, PLLC, dba Empower Wealth Management and Empower Wealth & Tax (“Empower Wealth Management” or “EWM”),
an SEC registered investment adviser that only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting.
The information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional adviser before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned, or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Personal investment advice can only be rendered after the engagement of EWM, execution of required documentation, and receipt of required disclosures. All investment and insurance strategies have the potential for profit or loss. Asset allocation and diversification will not necessarily improve an investor’s returns and cannot eliminate the risk of investment losses. Past performance is no guarantee of future results. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD #305031.
Insurance products and tax services are offered through Senior Tax and Insurance Advisors, PLLC, dba Empower Wealth Group (“Empower Wealth Group” or “EWG”). Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products. They do not in any way refer to investment advisory products offered through EWM. Rates and guarantees provided by insurance products and annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. EWG is not affiliated with or endorsed by the U.S. Government, Social Security Administration, nor the federal Medicare program. You may be contacted by a licensed insurance agent. Calling the number above will direct you to a licensed insurance agent. EWG may not offer every plan available in your area. Any information provided is limited to plans available in your area. Please contact Medicare.gov or 1-800-MEDICARE.
EWM and EWG are both affiliated companies of Empower Wealth, LLC (“Empower”). Investment adviser representatives of EWM may have a financial incentive to recommend tax and insurance products and/or services offered through EWG which presents a conflict of interest. This conflict is addressed by EWM’s adoption of its Code of Ethics, which requires that all EWM’s Associated Persons place the interest of clients ahead of their own. Clients of EWM are also free to choose their own tax and/or insurance professionals and are under no obligation to utilize the services offered through any related entities or persons associated with Empower.
Strategic Partners listed on this page are not employees of EWM and are not affiliated through common ownership.
We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.
© Empower Wealth Management All Rights Reserved.
