Ask the Expert: A man left his IRA to his siblings when he died. What do they need do now?

My brother passed away in December of 2021 at the age of 69. He hadn’t yet taken any distributions from his IRA, which he bequeathed to his six siblings and friends. Since I’m 75, I’m going to take a required minimum distribution (RMD) from my share, and I intend to drain it by the 10th year. Any idea what my siblings need to do?

You don’t have to empty your share of your late brother’s account within 10 years of his death, and your siblings probably don’t either.

True, the new rules require most IRA beneficiaries who inherit accounts on or after Jan. 1, 2020, to empty them within 10 years. And if the deceased IRA owner was subject to RMD rules when he died, the beneficiaries must also take RMDs in years one through nine.

But five categories of beneficiary are exempt from the 10-year payout requirement. They must take RMDs, but can stretch them over their life expectancies. The categories are: surviving spouses, the deceased owner’s minor children until they reach the age of maturity, disabled beneficiaries, chronically ill beneficiaries, and beneficiaries not more than 10 years younger than the deceased.

That last category includes you, and any of your siblings and late brother’s friends who were older than he was, or not more than 10 years younger.

The first RMD from an inherited IRA must be taken by Dec. 31 of the year after the original owner’s death. The penalty for missing RMD deadlines ranges from 10% to 50% of the missed distribution. But the IRS usually waives the penalty for people who take the distribution as soon as they realize they missed it and file Form 5329, attaching a letter of explanation.

The bottom line

IRA beneficiaries aren’t all subject to the same rules.

More information

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