By Ian Berger, JD
IRA Analyst

Question:

Good Day,

I have a client (age 65) who inherited a traditional IRA from her mother in 2020. I know that she must empty the account by 12/31/30. She is not an eligible designated beneficiary (EDB). I’m trying to calculate the 2022 RMD. I have used several online calculators, and none calculates an RMD amount. They all say that no distributions are required as long as she withdraws the full amount by the end of the 10th year after death. How can I calculate the correct 2022 RMD amount? Thanks.

Sue

Hi Sue,

Since the mother died in 2020 after reaching her RMD required beginning date, the daughter is required to take annual RMDs during the 10-year period under IRS regulations issued in February. That 10-year period began in 2021. However, the new regulations just made us aware of the need to take RMDs within the 10-year period in this situation. So, it’s not clear whether a 2021 RMD will be required. We are hoping the IRS will issue guidance on this issue later this year.

If required, the 2021 RMD would be the 12/31/20 account balance divided by 21.8 — the RMD factor for a 64-year old under the old IRS Single Life Expectancy Table. (We use age 64 because your client is 65 this year, but the RMD starting point was last year.) The 2022 RMD is based on the 12/31/21 account balance divided by the 2022 RMD factor. Since a new IRS Single Life Expectancy Table became effective in 2022, the 2022 RMD factor must be reset. We start with 23.7, the factor for a 64-year old under the new table, and then subtract one to get a 22.7 2022 RMD factor. Subtracting one from the preceding year’s factor will continue for years 3 – 9. For more details, check out the January 3, 2022 Slott Report.

Question:

Hello,

I have a question about the application of the 5-year rule for Roth IRA accounts and inherited Roth IRA accounts.

Scenario: An 80 year-old client converts \$1,000,000 from a traditional IRA to a Roth IRA and pays the associated taxes. The client did not have a Roth IRA in place before making this first conversion in 2022. The client dies 6 months later, and the \$1,000,000 is split into separate inherited Roth IRAs for the son and daughter as named beneficiaries of the account.

Questions:

1) Are the son and daughter able to take money from the inherited Roth IRA tax free despite the fact that the original owner did not establish the Roth more than 5 years ago?

2) If the answer to Question 1 is “no,” can they wait to distribute any withdrawal until after the 5-year window passes to avoid any taxation?

Any help is appreciated.

David