RMD in year of death and year after death
A client died in Dec 2010 – he was 72 – he had not taken is RMD prior to death. His daughter is the beneficiary. Is there a RMD required for 2010? And is the 2011 RMD based on his daughter’s life expectancy or his? What I have research there is no RMD in 2010 and then it is based on her’s in 2011. Any thoughts?
Permalink Submitted by Alan Spross on Tue, 2011-02-08 18:35
Since the client had not taken his RMD for 2010, his daughter must take it ASAP. It is the same RMD amount he would have taken, but will be taxable to her in the year she distributes it. For 2011, her RMD as beneficiary is based on the 12/31/2010 account value and the age she will attain in 2011. Once that RMD divisor is determined, it is reduced by 1.0 for each year after 2011. Therefore, she will have to report two taxable RMD distributions on her 2011 return.
For his final 2010 tax return, Form 5329 should be added with a waiver of the excess accumulation penalty for reasonable cause and explain that his beneficiary took out his 2010 RMD in 2011 when she became aware that he had not taken his RMD before passing. The IRS will waive the penalty in these circumstances.