IRA IRA Beneficiary Rules and Inherited IRAs

Question 1

Under the SECURE Act, what distribution rule generally applies to non-spouse beneficiaries who inherit a traditional IRA from an owner who died after December 31, 2019?

Accepted Answer

10-year rule — the account must be fully distributed by the end of the 10th year following the owner's death

Answer

The SECURE Act replaced the stretch IRA for most non-spouse beneficiaries with the 10-year rule, requiring full distribution by December 31 of the year containing the 10th anniversary of the owner's death.

Question 2

Which of the following is an 'Eligible Designated Beneficiary' (EDB) who can still use the lifetime stretch IRA rule?

Accepted Answer

Surviving spouse

Answer

Surviving spouses are EDBs who can still stretch IRA distributions over their own lifetime rather than being subject to the 10-year rule.

Question 3

A surviving spouse who inherits an IRA can choose to treat it as their own IRA. What is the main benefit of this election?

Accepted Answer

They can delay RMDs until they reach their own RMD age

Answer

By treating the inherited IRA as their own, the surviving spouse delays RMDs until they reach RMD age, potentially providing years of additional tax-deferred growth.

Question 4

What is the 'at least as rapidly' rule in the context of inherited IRAs?

Accepted Answer

Once RMDs have begun, the beneficiary must continue distributions at least as rapidly as the original owner was taking them

Answer

If the IRA owner died after their RBD (required beginning date), beneficiaries must take distributions at least as rapidly as the owner would have using the owner's remaining life expectancy.

Question 5

What happens if a non-spouse beneficiary inherits a Roth IRA?

Accepted Answer

They are subject to the 10-year rule but qualified distributions remain tax-free

Answer

Non-spouse Roth IRA beneficiaries must follow the 10-year rule like traditional IRA beneficiaries, but qualified distributions from the inherited Roth IRA remain income tax-free.

IRA - Individual Retirement Account Practice Test

IRA - Individual Retirement Account Practice Test

IRA IRA Beneficiary Rules and Inherited IRAs