RMD time frame question
Hello –
We manage an employer/trustee directed Profit Sharing Plan. Each participant receives a statement yearly based upon a reconciliation prepared by the TPA.
One of the participants, in his mid-70s (so already subject to RMDs), passed away right before Christmas last year (around 12/22/20). He did not take any distribution in 2020 given The CARES Act and the waiving of RMDs for 2020. His primary beneficiaries were his 2 children, equally.
Question: Since he passed away in 2020, when no RMDs were required, will any RMD for 2021 be needed to be taken prior to the children transferring his Profit Sharing Plan interest into properly established Inherited IRAs? Although an RMD may not be rolled-over and must be taken first, in this instance would any RMD be required since he passed away last year? I assume not but please advise/confirm.
Thank you!
Jason
Permalink Submitted by Alan - IRA critic on Mon, 2021-01-04 16:50
No year of death RMD due to waiver as you indicated. Under the Secure Act his children are not EDBs unless they are disabled or chronically ill. A non EDB beneficiary is subject to the 10 year rule, meaning that until the 10th year there are no annual RMDs. If this is the case, a 2021 RMD is not due before doing direct rollovers to inherited IRAs set up for each beneficiary. If a beneficiary was an EDB, then annual life expectancy RMDs would be due in 2021 and the appropriate beneficiary RMD would have to be distributed prior to the direct rollover.