SECURE ACT
With the SECURE act now “securely” in place, the ability for a non spouse beneficiary to stretch an inherited IRA has been limited to 10 years. After 10 years, the account must be emptied. Obviously a dramatic and severe reduction in time vs the previous rule of allowing non spouse beneficiaries the opportunity to stretch this inheritance over their life expectancy.
Under the previous rule, and law, to stretch the IRA, the non spouse beneficiary had to properly re-title an inherited IRA this way. “John Doe deceased, inherited IRA for the benefit of Jane Doe, beneficiary”.
Under the new law, is the non spouse beneficiary required to re-title the inherited IRA the same way, to enjoy the 10 year stretch? Or do they just leave the money in the deceased’s name? ( I doubt it ). Or do they just transfer the inherited IRA to their own name? If so, wouldn’t this be considered a “distribution” and be subject to ordinary income taxes on the full amount?
Thanks so much.
Permalink Submitted by Alan - IRA critic on Fri, 2020-01-03 23:16
There is no change in how inherited IRAs need to be titled. The name of the decedent and the beneficiary must be listed, in no particular order. The custodian may have a particular requirement based on their processing platform. If the account is mistitled it can often be corrected without a taxable distribution as long as an inherited IRA is not commingled with an owned IRA. Should an inherited IRA be inherited again by a successor beneficiary the title should be changed to omit the original owner, showing the successor beneficiary as having inherited from the original beneficiary.