Father, the primary beneficiary of an inherited IRA, dies before the account is exhausted. His Child becomes the beneficiary. Are RMDs now based on Child’s life expectancy?

No:

If the individual beneficiary whose life expectancy is being used to calculate the distribution period dies after September 30 of the calendar year following the calendar year of the employee’s death, such beneficiary’s remaining life expectancy will be used to determine the distribution period without regard to the life expectancy of the subsequent beneficiary.

September 30 of the year after the original IRA owner’s death is referred to as the “Designation Date.” RMDs are determined based on the life expectancy of the person who is the┬ábeneficiary of the IRA as of the Designation Date. The RMDs are locked in at that point and are not recalculated upon the death of the beneficiary. Instead, successor beneficiaries must take RMDs based on the original beneficiary’s remaining life expectancy.

Accordingly, Child calculates RMDs based on the schedule established when Father inherited the account. The same result would apply if Father was the beneficiary of a conduit trust, rather than beneficiary of the IRA directly.

Source: Treas. Reg. 1.401(a)(9)-5, A-7(c)(2)

Posted by Joel D. Roettger, JD, LLM, EPLS