RMD
Client passed away, without taking his RMD before death, and left a revocable trust as the beneficiary of an 80k IRA. The institution distributed the full IRA into the trust account creating a taxable event. The client had several other IRAs properly structured with the three children as designated beneficiaries. The total RMD for the year was approximately 120k. Is it correct to assume that the 80k distribution will partially satisfy the full 120k requirement? Also, is it correct that the remaining RMD due should be withdrawn from the inherited IRAs to satisfy the year of death RMD? Finally, does it matter which inherited IRA it comes from? Assuming one child is in a much smaller tax bracket could the full remaining RMD be taken from that account?
Permalink Submitted by Alan - IRA critic on Wed, 2021-09-15 00:47
This distribution to the trust in excess of the trust’s share of the year of death RMD should not have occurred unless the trustee of the trust authorized it. That IRA custodian does not have the authority to force out a distribution without authorized approval and that even includes the trust’s share of the year of death RMD.
The answer to your central question is very complex, and is not in their favor. The RMD aggregation rules do not carry over to the beneficiaries UNLESS the IRAs are all inherited by the same beneficiaries from the same decedent. In this situation, the trust is not the same beneficiary as for the other IRAs, and for the other IRAs it sounds like they all had different children as beneficiaries.
If the other non trust IRAs had separate beneficiaries, each beneficiary must complete their share of the year of death RMD, so if each inherited IRA is 30% of the total DOD value, the applicable beneficiary would have to take 30% of the uncompleted year of death RMD. The RMD for the IRA left to the trust was clearly completed and more, but there is no mechanism to apply the excess over the RMD for the trust IRA to the other IRAs, as client could have done while still living.
The lesson here is that when separate IRAs are created for different beneficiaries, the owner should plan to complete the RMD early in the year to avoid this complexity among beneficiaries.