Does it make sense that an RDD Distribution form only lists two options (uniform and joint life) if you choose Auto RMD
Does it make sense that an RDD Distribution form only lists two options (uniform and joint life) if you choose Auto RMD when a non spouse Beneficiary (child of decedent) inherits a traditional IRA? Neither of these are correct for the inheriting beneficiary who will choose Single Life Expectancy. On the Distribution Form for the transfer for the entire account there is a choice for Life Expectancy but not on the RDD Distribution Form for beneficiary’s own 2016 RDD and onward (if Auto RMD is chosen). I can’t seem to get this clarified with the custodian. Maybe I’m missing something? Thank you.
Permalink Submitted by Alan - IRA critic on Thu, 2016-11-03 03:45
The custodian should be able to help you, but something is amiss here. What exactly does RDD stand for? You have to be very careful here because a critical error with a distribution form could result in a full distribution, and there is no cure for that.
Permalink Submitted by Cheryl Van Beek on Thu, 2016-11-03 18:59
Per Custodian, it’s referred to as RDD when you take it from the Inherited account, and RMD when you take it from the original account. Maybe it stands for Required Death Distribution. RDD is not printed on the Distribution Form; the custodian actually just wrote that across the top of the form to differentiate it from the other Distribution Form which will be used to move entire account to the Inherited IRA. But knowing how critical account set up & distribution are, I’m concerned about: the form only listing two options (uniform and joint life) if you choose Auto RMD. As noted above, inheriting beneficiary wants Single Life Expectancy. Does this make sense? Is there something else I should be asking? Thank you.
Permalink Submitted by Alan - IRA critic on Thu, 2016-11-03 19:29
RDD is not an IRS term, and the form appears to have inconsistencies as you pointed out since Tables II and III only apply to owned IRAs and never to beneficiary distributions. “Auto RMD” probably means they calculate it and distribute it at some specified time, but when they do not show the correct tables, the RMD will fall short because the single life table produces the largest distribution. This is probably not the correct form, but you will have to get hold of someone there to resolve this. It is too risky to return a form that does not correspond to the situation.
Permalink Submitted by Cheryl Van Beek on Thu, 2016-11-03 20:47
Thank you.
Permalink Submitted by Cheryl Van Beek on Thu, 2016-11-03 20:58
Another wrinkle in above situation is Custodian is saying to use one distribution form for both distributions since they are both coming from the same account (new inherited IRA). But one distribution is the 2015 distribution that deceased was mailed but never cashed before passing away which ended up being stopped, redeposited and reversed on 1099R. So beneficiary must take that and request tax waiver as well as beneficiary’s own 2016 RMD. However, if beneficiary is taking own RMD according to their single life expectancy (since non spouse beneficiary and has much longer expectancy than original owner) that 2016 RMD would be calculated by single life and the 2015 decedent’s would be the exact amount of the original check which was based on whatever table decedent was using, and one is one time payment and the other will be annually ongoing, so wouldn’t there need to be two separate forms for these distributions? Thank you so much!
Permalink Submitted by Ben Meyer on Fri, 2016-11-04 00:51
What type of institution is this? Is this custodian a large bank or broker, or is it a small bank or other small institution?
Permalink Submitted by Cheryl Van Beek on Fri, 2016-11-04 19:18
It’s a very large Broker. Any thoughts? Thanks.
Permalink Submitted by Alan - IRA critic on Fri, 2016-11-04 02:08
If the custodian cannot clarify this situation, a direct transfer to another custodian may be the best option. That said, IRA custodians are not all that interested in acquiring inherited IRA accounts. Another question is once the account is properly retitled, can a distribution just be requested in the correct amounts without using this “Distribution form”?
Permalink Submitted by Cheryl Van Beek on Fri, 2016-11-04 19:22
Well, the account had done well for the Original Owner through the years and it is a large well known firm. I could ask if this Distribution Form must be used for all future distributions,but it would seem so. I have a feeling something must just be breaking down in the custodian’s communications with me. That’s why I thought there might be something I just wasn’t getting or was missing. Thank you for so much help.
Permalink Submitted by Cheryl Van Beek on Fri, 2016-11-04 20:31
They’re now allowing beneficiary to use 3 different distribution forms to set up account. One for entire transfer to inherited IRA, one for decedent’s 2015 and 1 for Beneficary’s 2016 RMD. So it should work, however, the beneficiary is still being directed to check Owner and Not Beneficiary. Regarding Alan-iracritic’s earlier answer about the IRS viewing people inheriting IRAs as Beneficiaries (not owners) with respect to RMDs, do you think it would be alright to check off both Owner and Beneficiary if they allow that? Or should beneficiary stick to checking Beneficiary box only? Thanks again.