Question: Your client’s son, Henry, is eight years old. He was the named beneficiary of his Uncle Ray’s traditional IRA. Uncle Ray died in 2020 at the age of 55. The client is asking you about how this inheritance will impact Henry. Your client has heard that in some cases an IRA must be distributed in five years or perhaps 10 years but, seems to recall that perhaps Henry’s age determines how many years he will have to distribute the IRA income. What do you tell the client?
Answer: Henry is an eligible designated beneficiary. As such, he is required to distribute required minimum distributions (RMDs) over Henry’s life expectancy beginning in 2021, the year after his uncle’s death. Once Henry reaches the age of majority (generally age 18), the remaining balance in the IRA must be distributed within 10 years from that date.
Eligible designated beneficiaries are surviving spouses, minor children, chronically ill individuals [(§401(a)(9)(E)(ii)(IV)], or any other individuals who are not more than 10 years younger than the decedent.
If Henry had not been an eligible beneficiary, he would need to distribute the entire balance of the IRA on or before Dec. 31 of the year that includes the 10th anniversary of his uncle’s death or Dec. 31, 2030.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.