How the Inherited IRA Rules Work with Multiple Nonspouse Beneficiaries

• Author: Seymour Goldberg
• Profession: Senior partner in the law firm of Goldberg & Goldberg, P.C., Woodbury, New York
• Pages: 55-67

55

HOW THE INHERITED

IRA RULES WORK WITH

MULTIPLE NONSPOUSE

BENEFICIARIES

Many of the rules in general that apply to an inherited IRA for a non-

spouse benef‌iciary may apply to multiple nonspouse benef‌iciaries of an

inherited IRA. However, there are a signif‌icant number of differences

in applying the multiple nonspouse benef‌iciary rules. The key to the

multiple nonspouse benef‌iciary rule is the timely implementation of

the rules after the death of the IRA owner. The timely implementation

rules apply regardless of the age of the IRA owner at the time of his / her

death.

Assume that Jack, an IRA owner, died on July 1, 2016, at age 65. Fur-

ther assume that the nonspouse benef‌iciaries of his account were Todd,

his grandson, whose date of birth is March 1, 1997, and his son, Fred,

whose date of birth is August 15, 1977. Also assume that Todd and Fred

are equal benef‌iciaries of Jack’s IRA account.

According to the IRS, if Jack’s deceased IRA is divided in a cer-

tain manner and by a certain date, then each nonspouse benef‌iciary may

then use his / her term- certain life expectancy period in determining the

required minimum distributions from his / her pro rata share of Jack’s

deceased IRA account. The separate account rule if properly and timely

implemented is effective, commencing in the calendar year after the

death of the IRA owner.

In the case involving Jack’s deceased IRA, it is important that Todd

and Fred act timely and correctly in order to implement the rule. The

author refers to the rule as the separate account rule.

The best way to illustrate the rule is by means of several examples.

These examples follow: