Notice 2020-51 and 5-Year Distribution Schedule
If a decedent IRA is on a 5-year distribution schedule and 2020 was the 5th year where the remaining balance had to be removed (and was), is this considered an RMD for purposes of the August 31 rollback provision?
Permalink Submitted by Alan - IRA critic on Fri, 2020-07-31 21:47
Yes. For IRA owners who passed in 2015-2019, the 5 year rule effectively becomes a 6 year rule under the CARES Act RMD waivers. For a 2015 decedent therefore, 12/31/2021 is now the deadline to drain the inherited IRA. Notice 2020-51 expanded the CARES Act to allow an inherited IRA distribution that would have been a 2020 RMD to be returned to the distributing IRA account by 8/31 regardless of when in 2020 the distribution was made. The only issue here is the willingness of the IRA custodian to accept the rollover into an account that had issued a full distribution. It probably depends on if a systems limit prevents amounts from being returned to this distributing account. Since the Notice applies only to amounts that would have been RMDs, the only situation where an inherited IRA would be drained would be this one – the 5th year under a 5 year rule as LE RMDs would never drain an account. Plan to talk to someone knowledgeable with this IRA custodian.