inherited qualified deferred annunity – satisfying the remaining RMD
My father-in-law passed in June. He was receiving monthly RMD payments (1/12 of the RMD each month) from a qualified deferred annuity that had not been annuitized. There were 4 named beneficiaries to this annuity.
The insurance company paid the death benefit to the 4 beneficiaries (1/4 each). 3 of the beneficiaries did a trustee to trustee rollover of their share directly into an inherited IRA account. The 4th beneficiary took their share as a check payable to themselves and cashed the check. The annuity was not split into 4 individual accounts at the insurance company prior to issuing the checks
The insurance company is telling the 3 beneficiaries that each still need to take ¼ of remaining RMD from their inherited IRA. The insurance company is saying that although beneficiary #4 took the cash (more than the remaining RMD amount), the other 3 beneficiaries must still take ¼ of the remaining RMD from their inherited IRA since beneficiary #4 did not say their withdrawal was to satisfy the remaining RMD.
My understanding is that first money taken out the IRA annuity each year is counted toward satisfying the RMD. Is the insurance correct in saying each of the remaining 3 beneficiaries must withdraw ¼ of the remaining RMD from their inherited IRA? Or did the 4th beneficiary satisfy the remaining RMD for the annuity by taking their share as cash?
Permalink Submitted by Alan - IRA critic on Tue, 2025-01-07 11:31
4th beneficiary has completed the remaining year of death RMD, therefore the insurance company is incorrect according to the recent Secure Act Regs. Those Regs merely confirmed what had generally been accepted as compliance prior to the Act.
There was no reason or requirement for the 4th beneficiary to make a statement regarding their distribution. Any distribution taken automatically satisfies an incomplete RMD. The other 3 beneficiaries have established separate inherited IRA accounts and will be subject to annual RMDs based on their own LE in years 1-9 of the 10 year rule, or if any of these beneficiaries is an EDB, LE RMDs apply with no 10 year rule.
Permalink Submitted by scott tunney on Tue, 2025-01-07 12:07
Thanks for confirming the insurance company did not understand the RMD rules.
Permalink Submitted by Alan - IRA critic on Tue, 2025-01-07 14:20
The following is copied from the final Secure Regs summary, that could be provided to the insurance co;
“The final regulations also restore flexibility from § 1.401(a)(9)-5 in the 2002 final regulations relating to the required minimum distribution for the calendar year of the employee’s death by providing that a required minimum distribution must be paid to “any beneficiary” in the year of death rather than to “the beneficiary.” Thus, for example, if an employee who is required to take a distribution in a calendar year dies before taking that distribution and has named more than one designated beneficiary, then any of those beneficiaries can satisfy the employee’s requirement to take a distribution in that calendar year (as opposed to each of the beneficiaries being required to take a proportional share of the unpaid amount).”