Divorce and RMD in 2018

Submitted by Jay P. on Wed, 2018-12-05 19:17

Client (age 75) was divorced in Nov 2018. The ex-wife (age 75) will receive 50% of his IRA. The transfer to her IRA will likely occur before 12-31-18. The client intends to take his full RMD for 2018 based on 12-31-17 values. Is this correct? Secondly, as it relates to the 50% IRA that she is receiving, what are the ex-wife’s RMD requirements in 2018 if she receives this money by 12-31-18? Thank you.



Submitted by Alan - IRA critic on Thu, 2018-12-06 04:07

  • It is good that client will complete the RMD because despite the divorce transfer, the RMD for the year of transfer is fully client’s responsibility, so this is correct. It does not matter if client completes his RMD before or after the partial IRA transfer.  The ex wife has no RMD requirement for 2018, but will have in 2019 based on the 12/31/2018 value of the IRA transferred to her.
  • Conceptually, the client can look at his IRA as owned by both him and to the extent of his tax bracket, by the IRS. Taking out the RMD is essentially buying out the IRS’ interest in the RMD portion of his IRA, which at age 75 is less than 5%. Because his 12/31/2018 IRA balance will be reduced by the RMD he will take and his wife’s will not, her 12/31/2018 balance will be higher and therefore her RMD for 2019 will also be higher than his assuming the same divisor and equal investment returns. Of course, the investment returns will vary in the future while affecting the RMD amounts.

Add new comment

Log in or register to post comments