RMD in Year of Death from Multiple Banks
Decedent had traditional IRAs at 2 different banks, hadn’t taken 2010 RMD prior to death, spouse plans to rollover IRA into her own at one bank, and assume IRA as her own at the other. Is it necessary to take the total 2010 RMD from one bank prior to rolling over the IRA in that bank, or can she take part of the RMD from one bank, then roll over the remainder of the funds at that bank, then in a week or so take the remainder of the RMD at the second bank prior to making that account her own?
Thanks.
Permalink Submitted by Anonymous (not verified) on Sun, 2010-06-27 16:25
Since the spouse will receive the IRAs as a transfer (not rollover), it is not neccessary to satisfy the RMD prior to assumption. But the surviving spouse can if he/she wants to. It must be done sometime in 2010, though. Also, aggregation (taking from one bank) is allowed.
Conservatively, I would still take take the final RMD from each bank after assumption, so it can be clearly shown to the IRS that the final RMD was addressed. Surviving spouse might also have their own RMDs. Those I would take as separate transaction later in the year.
Key thing is that the final RMD shows as a distribution under the spouse’s SSN.
To address the “rollover” question. You can not take an actual distribution before [u]any[/u] outstanding RMD is taken for the year (final or regular).
Just my thoughts.
pko
Permalink Submitted by Diane Ryan on Sun, 2010-06-27 19:59
Here’s the language from one bank’s form, under Election of Payment, Spouse Beneficiary
“The participant died on or after the Required Beginning Date and I elect to assume the deceased participant’s plan as my own. I understand that the decedent’s required minimum distribution must be withdrawn prior to assuming the IRA.”
The other bank has similar language, so I am still unclear as to the answer to my original question.
Thanks.
Permalink Submitted by Alan Spross on Mon, 2010-06-28 01:53
There is no IRS regulation that requires the RMD to be taken as a condition of assumption. This is the custodian’s requirement only, but remember that an IRA custodian can adopt provisions MORE restrictive than the IRS, but not less restrictive with respect to RMD administration. The IRS only requires that the RMD be taken by the end of the year. One method of assumption by a sole surviving spouse is to make a contribution to the IRA, and perhaps these custodians would not accept such a contribution if their rules were consistent.
With respect to your original question, the surviving spouse can do as you proposed and not violate any IRS requirements, but this does not seem worth debating with the IRA custodians since the RMD must be taken by year end anyway. Any distribution is deemed to include the RMD, but an assumption is NOT a distribution and rollover as pointed out by pko.
Realistically, the beneficiary of an inherited IRA is unaware of the decedent’s RMD status in most cases, and often the year of death RMD is not taken out by the end of the year, especially with late year deaths. In that case, the waiver of the penalty using 5329 Instructions for “reasonable cause” is freely granted by the IRS.