Income tax of an IRA with no beneficiaries and no spouse

Submitted by Stephen M Gross on Thu, 2020-09-03 16:13

If an IRA has no designated beneficiaries and the owner has no spouse, is there a way to avoid income tax implications to the heirs of the IRA and reconstitute non-spouse beneficiaries to qualify for the ten year rule? I am not sure it matters but the decedent was already taking RMDs.



Submitted by Alan - IRA critic on Thu, 2020-09-03 18:10

  • After the actual beneficiary is determined (default per IRA agreement, estate beneficiaries of owner or intestate beneficiaries), any distribution to these beneficiaries will generate a 1099R reporting income to such beneficiary. If any beneficiary does not wish to receive a distribution, a disclaimer is allowed for a limited time. If a beneficiary does not take RMDs as required, they could be subject to the 50% excess accumulation penalty. The Secure Act does not change RMD rules for non individual beneficiaries such as estates.
  • If the estate of the owner is the beneficiary, the most likely result of beneficiary default provisions, the estate must take annual RMDs based on the remaining LE of the decedent in this case. The 10 year rule does not apply. Estates will typically pass these tacable RMDs through to the estate beneficiaries on Form K 1.


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