RMD on Deceased

Submitted by Andrew Rogers on Thu, 2018-12-06 15:07

We had a client that we discovered on our RMD list that had died in 2017. It appears the account now carried into December 2018 due to (what we understand) issues with getting the lawyers to finish everything.

Our question is: What will we need to do with the RMD on this? What tax-related issues arise from this situation? We want to make sure it doesn’t go into next year causing penalties to the new or deceased owner.



Submitted by Alan - IRA critic on Thu, 2018-12-06 16:22

  • The IRS is used to post death administration resulting in delays in determining any year of death RMD shortfall and completion of that RMD. Since the incomplete year of death RMD becomes the responsibility of the beneficiary(s) on the DOD, the beneficiary(s) must file a Form 5329 to request a penalty waiver for the year of death and any later years. The 5329 can be filed alone without a 1040X. However, the form should not be filed until the year of death RMD has actually been distributed, so efforts should be made to take care of this within a reasonable period of time. Once that RMD has been completed and the 5329 form(s) filed, the IRS will almost always waive the penalty.  Note that this RMD along with the beneficiary’s OWN beneficiary RMDs will be reported to the beneficiary on Form 1099R and taxable in the year received.
  • Note that if the IRA owner passed prior to the required beginning date, there is no year of death RMD. It is possible to be 71 years old at death and the RBD has still not been reached.
  • If there are multiple beneficiaries, the year of death RMD is a joint responsibility. That means that a beneficiary who withdraws their entire share in a lump sum will complete the RMD, and the others do not have to take a distribution. Obviously, coordination between beneficiaries is needed in this situation.

Submitted by Andrew Rogers on Fri, 2018-12-07 15:01

Thank you for the reply.  The one thing I don’t understand from the reply: is the beneficiary required to request an RMD for this year and are they required to also take their disbursement given that the owner died in 2017?  Also, the current beneficiary is a trust.

Submitted by Alan - IRA critic on Fri, 2018-12-07 15:49

Yes, the trust beneficiary needs to request distribution of the remainder of the year of death RMD and they will have to provide the amount to the IRA custodian.  One correction to my prior post – the 5329 for the year of death will only need to be filed for 2017. The penalty is not due for each year the RMD is late, just for the first year. So even if the year of death RMD is not distributed until January, only one 5329 (for 2017) needs to be filed after the late RMD is distributed.

Submitted by Andrew Rogers on Fri, 2018-12-07 16:00

The 2017 (what you’re referring to as the year of death disbursement I assume) was covered from regular distributions.  However, the distributions were stopped at death, so 2018 hasn’t been taken care of.  Therefore, the account carried into the year AFTER the year of death.  The year after the year of death is the RMD I’m referring to. Sorry I wasn’t clearer on that.

Submitted by Alan - IRA critic on Fri, 2018-12-07 16:53

The 2018 RMD is a beneficiary RMD and needs to be distributed this year or it will be late and require a 5329 to be filed for 2018 to request a penalty waiver.  Of course, the correct RMD needs to be determined depending on if the beneficiary is an individual, estate, or trust. If a trust, it needs to be determined if the trust is qualified for look through or not. For a variety of reasons beneficiary RMDs can be late, but if the beneficiary makes up the late distribution and files a 5329 citing what reasonable cause there was for the delinquency, the IRS will almost always waive the penalty. If any assistance with the actual amount of the RMD is needed, more details about the beneficiary type are needed.

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