RMD Requirements
I have a client age 85 who died December 28th 2009. Spouse is beneficiary age 75 with beginning dimentia. Has four children with about 12 years between youngest and oldest. Oldest born in 1955 eldest 1967. I have conflicting advice. One states since her husband died in 2009 she must take the first distribution based upon her single life expectency and then roll over to her account where she can use the joint life and the other states that she can immediately roll over to her own IRA and use the joint life table.
Also we like to have separate IRA’s set up for the four beneficiaries to avoid any problems when the client dies. Some of my peers disagree stating that since they can all be listed as beneficiaries under moms IRA that each would then be able to take their share and use their own life expectencies when they get their rollover.
Permalink Submitted by Alan Spross on Thu, 2010-12-09 18:41
Both of them are wrong. Due to the RMD waiver for 2009, there is no concern about whether client had taken his 2009 RMD. Spouse should do the rollover and her RMD for 2010 assumes she owned the IRA for the entire year. It will be based on the 12/31/09 balance and the Uniform Table applies (not the joint table). The only time the single life table would apply would be if she wanted to continue the IRA in inherited status for the entire year, and doing that would only increase her RMD and cause potential beneficiary stretch problems. She should definitely roll it over or assume ownership of the account and name her own beneficiaries.
The number of IRA accounts she has is a personal preference situation driven by the execution efficiency of all the parties. Note:
1) Continuing one account with 4 beneficiaries is much easier for surviving spouse than having 4 accounts and trying to keep them of equal value
2) Having separate accounts just means that the beneficiaries do not have to create their own separate accounts. But either way they need to understand that they cannot do indirect rollovers from their inherited account and can only move funds by direct trustee transfers. They have until 12/31 of the year after her death to create these separate accounts, but sooner is better.
Unless the beneficiaries are not mature adults, it is better to retain the single account and show the 4 equal beneficiaries. If even one of them is financially savvy, they can help the others set up separate accounts. But if the percentages are not equal or if the beneficiaries do not get along and she does not want them to know what the others are getting, that would result in a requirement for separate accounts, and for her have to deal with the 4 separate accounts. She would have to take a proportional RMD from each of them.