If an IRA account owner dies at age 65 and the IRA is payable to the account owner’s estate, which is not a qualified designated beneficiary, the money in the IRA will have to come out over five years, according to Bob Keebler , with Keebler & Associates. The IRA doesn’t need to be liquidated until the very last day of the fifth year, but all the money has to come out within a five year time frame.
By the way, a qualified designated beneficiary gets to use their life expectancy for RMDs regardless if the IRA account owner dies before or after his or her RBD, Keebler said. (By the way, the beneficiary wouldn’t have to take an RMD in the year of the IRA account owner’s death.)
By contrast, a non-qualified designated beneficiary would have to use the five-year if the IRA owner died before his or her RBD, and something called the “ghost” life expectancy if the IRA owner died after his or her RBD, Keebler said. The ghost life expectancy is essentially the deceased IRA owner’s theoretical life expectancy. (See table below.)
Postmortem RMD distribution period
|Death before required beginning date||Death on or after required beginning date|
|Qualified designated beneficiary||Life expectancy rule||Life expectancy rule|
|Non-qualified designated beneficiary||Five-year rule||“Ghost” life expectancy rule|
“The heart of this is this,” he said. “If you name a real person as the beneficiary, they will be able to take the money out of the IRA using their life expectancy for the RMDs.”