RMD on recently deceased person's IRA - Ed Slott and Company, LLC

Submitted by Don Martin on Wed, 2017-03-29 18:18

Aunt age 92 passed away recently and failed to do 2016 RMD for a traditional IRA (incapacitated, etc.) and hasn’t done 2017 RMD either. She is in zero tax bracket, heirs are in normal brackets. Can the RMD for 2016 & 2017 be withdrawn and charged by Custodian to her 1099 or must the RMDs be attributed to and charged to the 1099 for the heirs?

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Permalink Submitted by Alan - IRA critic on Wed, 2017-03-29 21:14

No. Aunt apparently passed in 2017, and the IRS Regs only state that the beneficiary is responsible for completing the year of death RMD, not the RMDs for earlier years the decedent might not have completed. Some decedents may never have taken an RMD. The 2016 RMD can therefore be ignored. All distributions the beneficiary now takes will be reported to the beneficiary on a 1099R for the year of distribution. Therefore, this beneficiary must complete the 2017 decedent’s RMD amount by year end and can also withdraw any additional amount they wish. Once the original owner passed, no subsequent distributions can be reported for the decedent. All must be reported to the beneficiary using beneficiary’s SSN.
The IRS has apparently adopted a position of not going after the decedent’s estate for the 50% excess accumulation penalty for RMD failures prior to the year of death. That would entail a huge can of worms since the IRA beneficiary may differ from the estate beneficiary. The beneficiary is not expected to research the entire RMD history for the decedent, just the year of death RMD status. Further, the IRS has also apparently decided not to force the beneficiary to make up late RMDs for the prior years as a matter of unstated policy. Since this is unstated, it is possible that in certain aggravated or fraudulent situations the IRS could be more aggressive.