MRD – Year of death
In the year of death does the fact that an IRA beneficiary is a charity affect the amount required to be distributed? The decedent was 80 and had not taken the RMD before passing. The IRA beneficiary is a qualified charity.
In the year of death does the fact that an IRA beneficiary is a charity affect the amount required to be distributed? The decedent was 80 and had not taken the RMD before passing. The IRA beneficiary is a qualified charity.
Permalink Submitted by Alan Spross on Fri, 2010-10-22 19:56
Great question, and I am not aware of any IRS Reg that deals with it. Therefore, the response is No, the amount is not affected. Normally, if the IRA owner passes without taking their RMD, the beneficiary must take it and the IRS settles for taxes from the beneficiary whether that beneficiary pays at a lower marginal rate or not.
But the charity will pay nothing on the distribution and will distribute the full account including the RMD that the owner did not take and the IRS will not receive any tax revenue at all.
So what could the IRS do about that? My guess is that they ignore it except if there were years that the owner did not take the RMD with the possible intent of getting more to the charity. In that case, the IRS could go after the estate of the decedent for some excess accumulation tax money. Since that is a hefty 50% of the amount that should have been distributed, it would probably lead to some kind of negotiated settlement between the IRS and the estate.
Have not heard of a specific case involving this, and since the IRS is less than consistent with RMD enforcement anyway, probably nothing would happen. Again, if more than one year of RMDs is delinquent, perhaps the estate should request a decision from the IRS so the estate can close.