Inherited IRA, Non Spouse

[Just-Lisa-Now-]

Inherited IRA, Non Spouse

Client died, age 94, left IRA to brother, age 87.

Brother converted to an inherited IRA.

Theres no 10 year option when someone is this age, right?

When I use an Inherited IRA RMD calculator, its dividing the total amount in the account by 6.6.

Total account is close to 400k, so the annual RMD is a hefty chunk of income each year that he really doesn't need. I just want to be sure he doesn't have any other options.

[Skylane]

Lisa, 

I think you're correct. RMD is RMD.  If he normally makes charitable contributions, you might suggest a QCD (Qualified charitable contribution).  

I tell my senior clients with RMDs who normally give throughout the year that instead of weekly/monthly contributions they should make 1 or 2 QCDs from their IRA. Much better tax benefit. 

[Just-Lisa-Now-]

Yes, looks like he's stuck with using his own life expectancy for the RMD.  I did send him the info about the QCD option.  Hes the trustee/beneficiary of a trust that received close to 3mill in NQ annuities, so his tax burden is quite high! 

If he sent the whole 60k in RMD to a charity, he'd save close to 30k in taxes (between IRS 37% and CA 12%). So it's really only 30k out of pocket for that 60k donation.

[qbteachmt]

"Yes, looks like he's stuck with using his own life expectancy for the RMD."

What year did this happen? That's really the old rule. The SECURE Act changed it for most people.

[Just-Lisa-Now-]

I thought since the brother is of RMD age and less than 10 years younger than the deceased that the exception applies and life expectancy should be used?

[qbteachmt]

I think I read this backwards. You are trying to either reduce what he takes (but can't divide by 10), or otherwise avoid the tax hit? Why not QCD the max of $100,000, then?

[BobKamman]

Where are you finding that the 10-year option doesn't apply?  

Probably too late now but if an alternate beneficiary was named, in a lower tax bracket, the younger brother could have disclaimed it.  

[elsaf50]

Hi there, I think I have a slightly similar situation...

Parent passed away Jan 2024, not having taken RMD's for 2023 or 2024.  I understand that the RMD for 2024 should be taken by me, the non-eligible designated beneficiary (non-minor child of deceased).

My question pertains to the missed RMD for 2023, what should be done in that case?  Should Form 5329 be filled out on behalf of the deceased or should I fill out the 5329 and ask for a reasonable cause waiver of the penalty (and take the missed 2023 RMD myself)?

Thanks in advance for your time and assistance.

[qbteachmt]

@elsaf50 

You seem to be lost on the internet.

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