Beneficiaries
What is a beneficiary
Someone/something that inherits assets from a decedent
Are distributions from an inherited IRA subject to the 10% early withdrawal penalty? Why/Why not?
No, withdrawals are required form these accounts and the beneficiaries could be any age
What is a inherited-inherited account
An inherited IRA that has been inherited by a beneficiary
When can money go into an inherited IRA
Upon death, or consolidating the assets from the same decedent
The beneficiaries
How can a spouse be listed as a beneficiary
Spouse by name or "To the person I am married to at the time of my death"
When can distributions from an inherited Roth IRA be tax-free?
If between both the beneficiary and the original account owner the five-year requirement has been satisfied
How can you tell if an account is an inherited-inherited
Usually this is done when the account owner mentions that they did not receive the assets from the original owner or possibly an alert. If you are the first one being told make sure you leave an alert
What is a designated beneficiary under SECURE Act? What is a non-individual beneficiary?
An individual that does not meet the criteria to be an "eligible designated beneficiary." A non-individual would be an estate, charity or non-qualified trust
What are the requirements under the 5-year rule
The beneficiaries are responsible for redeeming the entire account by the end of the 5th year after the year of the IRA owners death
What does it mean to disclaim the assets? If they choose to disclaim are they able to disclaim a part of it or does it have to be all?
The beneficiary does not wish to receive the assets from the ownder. They can disclaim the full or partial amount
What is the difference on check distributions from an inherited IRA? What if the check cannot be accepted by the bank what do you do? Do you need any additional security for this?
It will have the account owners name and the benefactors information on the check as well. If they will not accept the check this way then we would need to do a special payee check to remove the benefactors name. No additional security if only removing the benefactor line
Who can calculate the RMD on an inherited inherited account
A tax professional
Under SECURE Act what is an Eligible designated Beneficiary
A spouse, a minor child of the IRA owner, a disabled person, chronically ill person, a person who is not more than 10 years younger than the IRA owner
Under the SECURE Act what is an eligible designated beneficiary's distribution rule Post RBD? What about a non-individual?
RMD Rule based on own LEF. RMD rule subject to the original ownders single LEF non-recalculated
What does it mean to assume an IRA and who is eligible to assume it
A spouse is eligible and it means that the spouse moves the inherited money into their own IRA, treating it as their own
What does code 4 mean on a 1099-R? What is code T on a 1099-R? What about Q?
4-Distributions from an inherited traditional IRA. T-Inherited Roth IRA distributions where the 5-year rule is not satisfied. Code Q is used for Inherited Roth where the 5-year rule is met
Who will be the benefactor/decedent listed on an inherited inherited IRA
The original account owner
Under SECURE Act if a client was pre-RBD and were an eligible designated beneficiary what options do they have for distributions?
Ten year rule or the RMD rule
What does recalculated mean? What does non-recalculated mean?
Recalculated means that each year you calculate an inherited IRA distribution, you must return to the life expectancy table and find the factor that correlates to your age. Non-Recalculated means only the LEF for the first year of distribution is obtained from the table. For each year after that the LEF is derived by subtracting 1 from the factor used previously
When a spouse inherits an IRA are they able to assume it ? If so how would they? or wouldn't they?
Yes they can, A spouse beneficiary wanting to assume an IRA after first inheriting would submit a LOI (no notary is needed on this LOI) with instructions stating that they wish to "distribute and rollover" the assets into their own name, along with a completed Vanguard Brokerage Account IRA Application (if the spouse doesn't already have an IRA in their own name at Vanguard).
Who did the SECURE Act affect in regards to inherited IRAs
beneficiaries of accounts where the owner passed away after 2019
What is the Pre-RBD rule for a designated beneficiary under SECURE Act? What about a non-individual beneficiary?
Ten year rule and five year rule
How do multiple beneficiaries satisfy a decedents RMD when they passed away before doing so
The IRS does not state how they should satisfy the RMD as long as the full amount is distributed from the beneficiaries IRAs. So it could be taken by one or a combination of all