Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers. Here’s the question of the day.

Question: My client inherited an IRA from her mother, who inherited the same IRA from her own mother. Can my client stretch RMDs throughout her own life?

Answer: No. IRA distributions can be stretched only by the account owner (after she reaches age 70 ½) and by the account owner’s beneficiary. Since your client isn’t the beneficiary of the original account owner, she cannot stretch RMDs based on her own life expectancy.

Instead she may continue the distribution schedule her mother was using. Of course, your client can take greater distributions than the RMDs if she prefers.

Here’s an example. Suppose Dorothy died in 2003 leaving her daughter, Barbara, an IRA worth $300,000. Barbara turned 57 in 2004, resulting in an RMD period of 27.9 years. Ten years later, in 2013, Barbara died, leaving the IRA, now worth $179,000 to her daughter, Jennifer. In 2014, the distribution period is now 17.9 years (i.e. 27.9 years minus 10 years). Therefore, Jennifer’s RMD for 2014 is $10,000.

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