RMD following death
Dear Alan et al,
We have a client who recently passed away prior to taking her $3,500 RMD for 2018. Our understanding is that we can distribute 1/3 of this RMD directly to her 3 primary beneficiaries (her daughters). Then, we can distribute the remaining balance to an inherited IRA for each daughter. Also, our understanding is that the daughters will not need to take another RMD until 2019.
Are we missing anything?
Thanks in advance,
Chris
Permalink Submitted by Alan - IRA critic on Thu, 2018-11-15 21:33
Chris, if one of the daughters would like to take out the full 3500, the others do not have to take any of the year of death RMD since the year of death RMD can be split in any fashion between the beneficiaries. The year of death RMD can only be taken after the account is retitled as a beneficiary IRA, and it is simpler to retitle it and set up separate inherited IRAs before any distribution is taken, and then the beneficiaries can complete the year of death RMD in any proportion. Of course, coordination and communication between them is required. Just in case one of them is not cooperative, and the others do not wish to take out more than their share (1/3) of the 3500, the IRS is not going to penalize those that distribute at least 1/3 of the 3500. Note that all inherited IRAs must be created only by direct trustee transfer. No rollover is possible for any amount actually distributed.
Permalink Submitted by Christopher Combs on Sat, 2018-11-17 23:28
Alan,Thank you for this response. Am I correct that if the daughters receive their inherited IRAs in 2018, they won’t have to take out an additional RMD (based on their own life expectancy) until 12-31-19? One of the daughters is concerned that if the original IRA is split in calendar year 2018, not only would we have to take an RMD for the original account owner in 2018 but we would also have to take out an RMD for each daughter in 2018.