Can a successor beneficiary take distributions over his life expectancy? Denise Appleby answers the question:
Because your mom’s IRA is an inherited IRA (beneficiary IRA), you are considered a successor beneficiary. Successor beneficiaries are not eligible to take distributions over their life expectancies.
As a successor beneficiary, your distribution options depend on whether your mom died before 2020.
We are now in 2021. Since you did not say when your mom died, I will respond to both possible scenarios:
Your mom died before 2020, and
Your mom died after 2019
If your mom died before 2020
If your mom died before 2020, you are eligible to take distributions over what remained of her life expectancy when she died.
Example 1: Susan inherited an IRA from her father in 2015.
Susan was age 40 in 2015. Susan elected to take distributions over her single life expectancy.
Susan’s life expectancy is based on her age in 2016 (the year after the year her father died), which makes it 37.9 (based on the single life expectancy table issued by the IRS each year in IRS Publication 590-B).
Because Susan is a nonspouse beneficiary, her life expectancy is non-recalculated, which means that one (1) is subtracted for each subsequent year. For example, Susan’s life expectancy for the following five years subsequent years would be:
2016 – 37.9
2017 – 36.9
2018 – 35.9
2019 – 34.9
Assume that Susan died in 2019. Her successor beneficiary would be eligible to continue taking distributions over her remaining life expectancy of 34.9 years.
Therefore, if your mom died before 2020, you would be eligible to take distributions over what remained of her life expectancy.
If your mom died before 2020, consult with your tax advisor regarding the life expectancy factor that you are required to use.
Important note: The life-expectancy tables changed for 2022 and after.
If your mom died after 2019
If your mom died after 2019, you are subject to the 10-year rule. Under the 10-year rule, you are permitted to choose whether to take distributions for the first nine years. But the entire inherited RIA balance must be distributed by December 31 of the 10th year that follows the year in which your mom died.
Example 1: Using the same facts as in example 1 above, except that Susan died in 2020.
Her successor beneficiary would be subject to the 10-year rule, which means that the entire account balance must be distributed by December 31, 2030. Her beneficiary may choose whether to take distributions from 2020 to 2029.
The distribution options for beneficiaries are complex, and making a mistake could result in penalties being owed to the IRS. Be sure to consult with your tax advisor for assistance with ensuring that you meet the distribution requirements.
The information provided above may not be used as tax or legal advice.