Inherited IRA estate

I have a client that recently passed away without a living beneficiary. I set up an Inherited IRA in the name of the estate of the descendant. He passed away in 2020, and the money will be split between 3 beneficiaries.

My questions are:

– Once the money is in the Inherited IRA, does it all have to be distributed by a certain date in 2025?
– Once the money in in the Inherited IRA, does it live there or get transferred out?
– If RMDs are reinstated in 2021, does money have to be distributed every year or can we wait and distribute it all in 2025?



  • I assume that the IRA agreement has been checked to verify that the estate is the default beneficiary. The Secure Act did not change the RMD requirements for non individual beneficiaries such as an estate. Therefore, the inherited IRA can be stretched by the estate for either 5 years (death prior to RBD) or the remaining LE of decedent if he passed on or after the RBD. That means the inherited IRA must be drained by the end of 2025 only if decedent passed prior to RBD.
  • However, since the executor will not want to keep the estate open for nearly that long, the executor should assign the inherited IRA out of the estate to the beneficiaries of the estate. The beneficiaries must then continue the RMD treatment that would have applied to the estate, but the estate can be closed and each beneficiary can control their inherited IRAs. Transfer of funds to separate inherited IRAs can only be done by direct trustee transfer, either to inherited IRAs at the same custodian or a new custodian.
  • When RMDs resume in 2021,see above for whether the 5 year rule or LE of decedent applies.  


The descendant was 87 years old when he passed away. My follow up questions are:- I just looked it up and saw his LE was 4.9 years, so we stick with 5 years?- I set up an Inherited IRA in the name of the decedent’s estate. How do I assign the Inherited IRA to the beneficiaries of the estate?- Now that we know distributions have to happen in 5 years, do the beneficiaries have to take out RMD’s in 2020,2021,2022,2023,2024 and 2025? Or can all wait until 2025?



  • When using the remaining LE of the decedent, an annual RMD is required. 2020 RMDs have been waived, therefore the beneficiaries will have to take an annual RMD in 2021-2026. DIvisors starting in 2021 will be 5.7, 4.7, 3.7, 2.7, 1.7 and .7 respectively. This assumes decedent would not have reached 88 in 2020 and does not reflect changes to the single life table proposed for 2021. Not sure where you got that 4.9 figure from.
  • To assign the inherited IRA to the estate beneficiaries, you must send a letter as executor to the IRA custodian providing the SSNs and contact info for each estate beneficiary and stating that you are distributing the IRA out of the estate as a duty of your executorship. Some custodians may stonewall this attempt because they don’t much like to create more inherited accounts than they already have, but they usually bow to pressure if pressed. They all know assignment has been allowed by the IRS for many years, but sometimes act like they are not aware of this. Hopefully, this custodian does not fall into that category.


I got the 4.9 from putting in his DOB in the life expectancy calculator. He would have turned 88 on Monday so yes he reached 88 this year.- What would the new factors be?- If he assings them out of the Inherited IRA estate to the individual beneficiaries, is that going to cause a taxable event? If so, to whom?



  • Assignment to inherited IRAs for each beneficiary will result in a transfer of the respective balance and is not a taxable or reportable event (except for Form 5498). No taxes are due until an actual distribution is made from the inherited IRA accounts.
  • Beneficiary RMD based on the decedent’s age are determined starting in the year of death (2020) to get an initial factor and that factor is then reduced by 1.0 for each year after 2020.  The 2020 factor is not actually used because there are no RMDs due for 2020. Age 88 factor is 6.3, therefore 5.3 for 2021, 4.3 for 2022 etc. and the inherited IRAs would eventually be drained in 2026.
  • Still not clear how you are getting 4.9 for 2021 divisor unless you showed age 89 for his attained age this year.


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