Reply To: inheriting an IRA and minimum distribution rules

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Alan S.

Bruce, I just reviewed the new 2020 Pub 590 B. It seems like the IRS has continued some pre Secure options that the Secure Act text disallowed.

One of those happens to be the option for the eligible designated beneficiary of decedent passing PRIOR to RBD to opt out of the life expectancy stretch into the 10 year rule or even into the 5 year rule (see p 11). But it seems unlikely that the custodian’s agreement would be so restrictive that they would not recognize anything but the 5 year rule.

The agreement itself should be reviewed, and since the IRS just released the 590 B, it is unlikely that any custodian could have already incorporated this into a new agreement. Actually, prior to Secure, I cannot recall hearing of any custodians requiring the 5 year rule for designated beneficiaries. That would pretty much ruin their IRA business.

To your original question, if this custodian’s beneficiary provisions are this restrictive and the 5 year rule did apply for the present custodian, there are no RMDs due until year 5. Therefore, the beneficiary should be able to do a direct transfer to a new custodian before the deadline to make the life expectancy election at the first custodian.