Inherited IRA Account

A beneficiary may take a withdrawal at any time by telephone or in writing, or they can establish automatic withdrawal to help meet the Required Minimum Distribution requirements by the IRS.

Generally, Required Minimum Distributions (RMDs) from an inherited IRA must be made by December 31 following the year of death of the original owner. However, depending on various circumstances, an RMD can be deferred if the beneficiary is a spouse.

Death of the owner prior to 12/31/2019, a non-spouse beneficiary may have the option to distribute the entire amount by the end of the calendar year containing the fifth anniversary of the owner’s death. Or, distribute RMDs over the lifetime of the non-spouse beneficiary beginning the following year of death of the original owner.

Generally, this 5-year rule comes into play when the original owner did not name a beneficiary and they were not married at the date of death. In addition, it applies when the beneficiary is an entity, i.e., estate, charity or non-person.

As a result of the SECURE Act of 2019, if the original owner passes away after their Required Beginning Date (April 1st after age 72, i.e., death occur prior to 12/31/2022 or after age 73, i.e., death occurred prior to 12/31/2023), then a Non-Eligible Designated Beneficiary may need to take annual RMDs for the first 9 years beginning following the year of death of the original owner. Then by the 10th year, the amount must be depleted. The rules changed for non-spouse beneficiaries when the original owner passed away after 12/31/2019. A non-spouse beneficiary will generally be required to distribute inherited amounts within 10 years. However, RMDs over the non-spouse beneficiary lifetime could occur for those who, at the time of the account owner’s death, are

• disabled individuals,
• certain chronically ill individuals,
• beneficiaries whose age is within 10 year of the decedent’s age, and
• minors (they would begin a 10-year payout period upon reaching the age of majority)

Spouse Beneficiary

An inherited IRA may be an acceptable account type for a spouse that needs the flexibility of withdrawing assets prior to age 59½. Only a spouse beneficiary can treat an inherited IRA as their own for required distribution purposes.

Generally, RMDs must start the year following the year of death of the original owner. However, a spouse beneficiary may wait to take distributions until the original owner would have reached age 72 by 12/31/2022 or age 73 by 12/31/2023.

Non-Spouse Beneficiary

If you were not planning on receiving an inheritance or don’t need the assets to maintain your living costs, then as a non-spouse beneficiary, you may want to consider leaving the assets in an inherited IRA will taking distributions under the IRS-approved distribution methods, which could last over your lifetime as assets grow tax-deferred and if the account is an inherited Roth IRA tax-free (assuming the 5-year holding period is met).

Many financial institutions refer to these accounts as “Stretch IRAs” for beneficiaries. When moving an inherited IRA between financial institutions it may be preferred to do a transfer of assets oppose to taking physical receipt of the assets. Generally, a 60-day rollover is not available for non-spouse beneficiaries.

Due to the complexities of beneficiary options for an inherited IRA, it is recommended to seek professional tax advice.

For help calculating your RMD, please contact a Janus Henderson Retirement Specialist at 800.525.1093.