Q. I have an inherited IRA that eventually will be left to my three children. Will they have to continue my same RMDs or will it be recalculated for them? How does it work?
A. Unfortunately, you and your beneficiaries will need to follow some strict rules.
Because we are talking about an inherited IRA, you were the original beneficiary and your children are the successor beneficiaries, said Yale Hauptman, an estate planning attorney with Hauptman and Hauptman in Livingston.
“Under IRS rules, if you die before withdrawing all the funds from an inherited IRA, then they are bound by the same Required Minimum Distribution (RMD) schedule that you had chosen when you inherited it,” Hauptman said.
You probably chose either your life expectancy or the life expectancy of the original plan participant, whichever is longer. The successor beneficiaries must continue to withdraw what is left according to that same schedule, he said.
That is a different outcome than if you leave your own IRA to your children.
“In most cases, they would be able to withdraw the funds over their own life expectancies,” he said. “In other words, they would be presented with the same options that you had when you inherited the IRA you are inquiring about.”
Keep in mind that this is the general rule but IRA rules are quite complicated and there are many exceptions to the general rules, Hauptman said. You should ask the financial institution where the IRA is held whether they have any rules with regard to their IRAs that may alter the general rules.
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