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, and elected to stretch based on the beneficiary’s life expectancy.  My client has named her own son the beneficiary of the inherited IRA.  Can the son re-stretch the IRA balance at her mother’s death?

Answer: No.

 

Assuming the client stretched her mother’s account based on the client’s life expectancy, she followed this rule:

The RMD for the beneficiary is calculated as follows:

Determine the designated beneficiary’s life expectancy using the beneficiary’s age at the end of the calendar year following the year of the owner’s death using the Single Life Table; and in each subsequent year, subtract one year from the number used in the prior year.

If the client was 59 at the time she started stretching, the Single Life Table factor would have been 26.1.  The longest the account can be stretched is 26.1 years.  So if the beneficiary-client passes away 15 years into the stretch scenario, her son, the next beneficiary, would be able to continue to stretch based on his deceased mother’s stretch—a maximum of 11.1 years.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.