RMD Timing on Inherited IRA
Client died in May 2011 and hadn’t taken RMD. IRA will be split among three adult children beneficiaries. Do they take RMD in 2011? Does it have to be taken prior to account transferring to new custodian?
Client died in May 2011 and hadn’t taken RMD. IRA will be split among three adult children beneficiaries. Do they take RMD in 2011? Does it have to be taken prior to account transferring to new custodian?
Permalink Submitted by Alan Spross on Thu, 2011-06-23 20:44
The order of things depends on what the beneficiaries want. The 2011 RMD must be taken in 2011, but the IRS does not require it to be assigned equally to each beneficiary.
In the simplest situation, the current IRA should issue 1/3 of the RMD to each beneficiary before the transfers are made to BDA accounts, OR transfer 1/3 to each BDA and then each would take their 1/3 of the RMD before year end. The IRS does not require the RMDs be taken prior to transfer as long as distributions are made by year end.
But if one of the beneficiaries wants to take a large enough distribution to cover the full 2011 RMD, the others do not have to take a 2011 distribution. If this were the case, to avoid accounting issues, have the two beneficiaries not wanting distributions each transfer their full 1/3 share to BDAs. Then the remaining beneficiary should take out the full RMD and transfer what is left to their own BDA OR do the transfer first and take the full RMD from the new BDA before year end.
Coordination between beneficiairies and clear communication to the IRA custodian is the key here.
Permalink Submitted by Diane Byrne on Mon, 2011-06-27 15:05
Is the RMD amount for 2011 based on the deceased’s life expectancy or on the life expectancy of each beneficiary?
Permalink Submitted by Alan Spross on Mon, 2011-06-27 17:39
The 2011 RMD (year of death) is the deceased’s RMD for 2011 determined from the total owned IRA balances on 12/31/2010. The divisor is determined by the age the deceased would have attained had they lived to the end of 2011.