Jump to content

Help with potential inherited IRA's and best planning techniques

Recommended Posts


The situation is that an 85+ year old client has a terminal disease and has a life expectancy of several weeks to maybe a few months.

This person has no spouse and has named his four adult children as beneficiaries of about $300k each. 

I've read everything I can find on the new Secure Act rules, and it seems the best planning the beneficiaries can do is inherited IRAs and withdraw the money over a 10-year period.

But I'm not even sure that's correct.

Can the beneficiaries implement inherited IRAs to receive their distribution from the deceased's pension plan 

If so, is the period during which they must withdraw the money 10 years? And if so, must withdrawals be level or can they wait 9 and 1/2 years and take all the money at once? Or decide each year how much they want as long as they take it all out in 10 years?

Is there a tax deferral strategy that's better, if deferring taxes is their goal? 


Thank you. 

Link to comment
Share on other sites

I assume your client pension plan pays lump sums that would be eligible for rollover. 

Based on the 2022 proposed regulations, if he is already beyond required beginning date (which he would be if the distributing plan is an IRA or if he no longer worked for the employer maintaining the pension plan as of the end of 2021), the 4 children must continue to receive life expectancy based RMDs each year (starting in the year of the participant's death if the participant didn't satisfy his RMD before death, or otherwise starting the next year) in addition to exhausting the entire balance at the end of the 10-year period.  (This assumes that none of the kids are disabled or chronically ill individuals who would be permitted to continue receiving life expectancy based minimum distributions for a period of time beyond 10 years).

They can take out more than the minimum for a year from their inherited IRA if that's to their advantage. I think you really need to ask about the tax brackets expected for each of the beneficiaries over the 10 year period, and whether including an additional amount in income may increase the taxation of their social security benefits. (For example, it may be better sometimes to include an amount in income earlier if their marginal bracket tax bracket in that year is lower.  In doing projections, keep in mind that the 2017 tax cuts are ending in 2025). 


Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Create New...