Deceased Client – Bene Options

Submitted by brcwm on Thu, 2022-11-03 18:37

Client recently passed away and has 5 beneficiaries (ages spanning from 55 to 65).
1) There is no Bene IRA distribution penalty based on age of beneficiary, correct? All would be under the new 10yr rule.
2) Being that we’re close to the end of the year, is there any way we could take the RMD from original IRA vs the individual 5 benes?
3) I believe we can aggregate the RMD – doesn’t matter what bene takes it, just that the full RMD needs to be taken?
Thanks.



Submitted by Alan - IRA critic on Thu, 2022-11-03 19:36

  1. There is never a penalty on distributions taken from an inherited account. The 1099R will code the distribution as a “death distribution” code 4.
  2. No. The custodian will want to have each beneficiary establish their own inherited IRA under their own SSN. No distributions can be taken from the owner’s IRA account after passing. The custodian wants to maintain that account soley under the decedent owner’s SSN.
  3. Correct. The year of death RMD should be completed by year end, although the proposed Regs would extend that deadline to the 2022 tax year due date including extensions. The decedent’s year of death RMD can be taken in any combination from the beneficiaries inherited IRA accounts, but that will take coordination between them as to how much each will withdraw. The IRS has not been penalizing any beneficiary that takes out at least their own share of the decedent’s year of death beneficiary, and this could become a factor if any beneficiary procrastinates in setting up their own inherited IRA account, since that beneficiary will not be able to take a distribution.
  4. If the deceased was the parent, they passed after their RBD. Under the IRS proposed Regs each beneficiary would be required to take annual life expectancy RMDs within the 10 year rule. These beneficiary RMDs would start in 2023. The inherited IRAs must be drained by 12/31/2032.


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