Know the IRC for taking RMDs on Inherited IRA?
I’m fighting with an RBC Dain broker who is telling my client he MUST take out -in full- his decreased father’s IRA.
(Father passed away last fall, wife was sole bene who predecreased him; no contingents.)
I know my client could take out the IRA based on his deceased father’s life expectancy (he had already started taking the RMDs), but I need to show it to the broker in black and white. Anyone know where it’s buried in the Code? (didn’t see anything definitive in Pub 590)
Thanks,
Permalink Submitted by Kristin Kippen on Wed, 2008-01-30 23:27
I don’t have the tax code section, but if you have Ed Slott’s book “The Retirement Savings Time Bomb” it addresses this exact issue on page 126. It says “Unlike when an IRA owner dies before his or her RBD, if the IRA owner dies on or after that date and there is no designated beneficiary, then the IRA will be paidout over the IRA owner’s remaining single life expectancy based on the IRA owner’s age in the year of death – less 1 for each future year’s distribution.” The financial advisor you are dealing with must be confusing it with rules if the owner died prior to reaching 70 1/2. But actually, in that situation it could be paid out over five-years if they chose to do so. So either way, it sounds like the advisor is not aware of the rules governing IRA distributions after death.
Permalink Submitted by John Bergstrom on Thu, 2008-01-31 01:18
….I read the book, and……
That’s why I typed the post- there’s a million references to this fact, but I can’t find it in any IRC or Treasury Notice, not even a PLR! I’d be willing to bet it’s somewhere in 409, but can’t find the exact wording indicating it’s a legal act.
Alan, where are you?!
Permalink Submitted by Alan Spross on Thu, 2008-01-31 05:28
Following is a copy of IRS Reg 1.401a(9)5 – Q&A 5
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Q–5. For required minimum distributions after an employee’s death, what is the applicable distribution period?
A–5. (a) Death on or after the employee’s required beginning date. If an employee dies after distribution has begun as determined under A–6 of §1.401(a)(9)–2 (generally on or after the employee’s required beginning date), in order to satisfy section 401(a)(9)(B)(i), the applicable distribution period for distribution calendar years after the distribution calendar year containing the employee’s date of death is either—
(1) If the employee has a designated beneficiary as of the date determined under A–4 of §1.401(a)(9)–4, the longer of—
(i) The remaining life expectancy of the employee’s designated beneficiary determined in accordance with paragraph (c)(1) or (2) of this A–5; and
(ii) The remaining life expectancy of the employee determined in accordance with paragraph (c)(3) of this A–5; or
(2) If the employee does not have a designated beneficiary as of the date determined under A–4 of §1.401(a)(9)–4, the remaining life expectancy of the employee determined in accordance with paragraph (c)(3) of this A–5.
>>>>> >>>>>>>>>>>>>>
Elsewhere in the Regs it states that the DC plan rules apply to IRAs unless otherwise specified.