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  • 1.  Inherited iRA

    Bronze Most Valuable Member
    Posted 12-13-2022 01:35 PM
    Question
    Grandma dies in 2021
    She leaves her IRA to her son who takes a 2021 RMD
    Son dies at end of 2021 and leaves the inherited IRA to his two sons
    Does the fact that it is a twice inherited IRA make any difference in how they treat their newly inherited IRA?

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    Ira Kriegsman

    IRA D KRIEGSMAN CPA PC
    Woodbury NY
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  • 2.  RE: Inherited iRA

    Silver Most Valuable Member
    Posted 12-13-2022 01:43 PM

    When someone inherits an inherited IRA, that person is referred to as a successor beneficiary. This is different from a contingent beneficiary. A contingent beneficiary is the person designated to inherit an IRA if the primary beneficiary is unavailable. A successor beneficiary is the person who inherits the IRA after the original inheritor dies.

    Successor beneficiaries now fall into one of three possible categories. First, those who inherit an IRA from a post-SECURE Act eligible designated beneficiary. Second, those who inherit from a pre-SECURE Act original beneficiary. And third, those who inherit from a post-SECURE Act non-eligible designated beneficiary.

    In the first two scenarios, the successor beneficiary will most likely get a full 10 years before any distribution is required. However, if the successor beneficiary falls into the third category, the original 10-year clock keeps ticking. In other words, successor beneficiaries in the third category must distribute all assets from the IRA before the end of the tenth year following the original IRA owner's death. If the successor beneficiary inherits the IRA seven years after the original owner dies, the successor beneficiary will only have three years before the full distribution must be completed.

    It is worth noting that anyone who inherits an IRA from an eligible designated beneficiary cannot be considered an eligible designated beneficiary themselves, even if they meet the eligibility criteria. The IRS language governing this situation states very clearly: "If an eligible designated beneficiary dies before the portion of the employee's interest is entirely distributed…the remainder of such portion shall be distributed within 10 years after the death of such eligible designated beneficiary."



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    Marc Lusthaus
    CPA
    ROBERT S. LUSTHAUS, CPA PC
    Plainview NY
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  • 3.  RE: Inherited iRA

    Bronze Most Valuable Member
    Posted 12-13-2022 01:47 PM
    Thanks Marc

    ---------------------------------
    Ira Kriegsman

    IRA D KRIEGSMAN CPA PC
    Woodbury NY
    ---------------------------------





  • 4.  RE: Inherited iRA

    Silver Most Valuable Member
    Posted 12-13-2022 01:49 PM
    I should have first stated, the answer is YES, it makes a difference.
    Have a good day Ira

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    Marc Lusthaus
    CPA
    ROBERT S. LUSTHAUS, CPA PC
    Plainview NY
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  • 5.  RE: Inherited iRA

    Bronze Most Valuable Member
    Posted 12-14-2022 07:07 AM
    Ira

    You didn't mention if the son's took an RMD in 2022, which, with the penalty abatements for 21 & 22 they don't have to now. However they must start in 23, with about 8 years remaining as Marc pointed out.

    Jerry
    --
    Gerald S. Cohen, CPA
    cell 516 455-0643





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The opinions expressed are the views of the author alone and should not be attributed to any other individual or entity and shall not constitute an accounting opinion.