RMD before RBD & Gift RMD to Charity

Submitted by Julie Brangenberg on Fri, 2014-04-25 14:45

Hello.
Have a client who passed away before his RBD (DOD = 02/24/2014, RBD = 04/21/2014), but he elected to start taking his RMD monthly from his Government Thrift Savings Plan before he passed. The TSP is saying that since he started taking the RMD, his spouse has to continue for this year. Is this their rule or IRS rule?

Also, if she has to satisfy the remaining RMD for 2014, can she give it to charity, in order to avoid paying income taxes on it?



Submitted by mk foss on Fri, 2014-04-25 23:57

A qualified plan can have provisions that are more restrictive than the IRS regulations. That’s the case here, Taking distributions before the RBD doesn’t necessarily mean that they must be continued at the same rate – per the regulations.The provision allowing an RMD to be given to charity expired 12/31/13 but has been introduced again in Congress to be reinstated as of 1/1/2014. If she were to give the remaining RMD payments for 2014 to charity she would not include them in income if the law is reinstated (which is likely) or she would include the payments in income and get an itemized charitable deduction for all that went to charity – it’s almost a wash. 

Submitted by Alan - IRA critic on Sat, 2014-04-26 02:29

The following is copied from IRS Reg 1.401(a)(9)-3, Q &A 3 dealing with deaths PRIOR to the RBD such as this: (b) Spousal beneficiary. In order tosatisfy the rule in section 401(a)(9)(B)(iii) and (iv), if the sole designated beneficiary is the employee’s surviving spouse, distributions must commence on or before the later of— (1) The end of the calendar year immediately following the calendar year in which the employee died; and (2) The end of the calendar year in which the employee would have attained age 70  1⁄2

  • The fact that the employee took RMD distributions prior to the RBD is immaterial. The rest of the RMD for the year of death does not need to be completed by the spousal beneficiary. It is not clear whether the TSP does not understand this IRS Reg or has a policy to require the distribution, but any such distribution to the spouse is not a statutory RMD and the spouse could roll it over to their own IRA if they wanted.
  • A QCD if extended by Congress must come from an IRA, it cannot be distributed from the TSP. But if the surviving spouse rolls a forced distribution over to an IRA and is at least 70.5 on the date of a QCD, the QCD can be made. But the surviving spouse could just keep the rollover in the IRA and it would eliminate the tax on the forced TSP distribution if the TSP does not change their mind.

   

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