There has been so much confusion about RMD requirements in 2020, 2021 and 2022

Submitted by Gary Webb on Thu, 2023-07-13 01:06

As the advisor, I want to make sure I do the correct thing for my client.
My client’s father passed away in 2022 and was previously taking annual RMD’s.

This is what the client emailed to me:

He has an IRA with about $150,000.00 on Decembeer 31, 2022. The IRA beneficiary is the estate, not the trust. I am liquidating the assets in the IRA and moving into the Schwab IRA we created for my father. Then I will distribute to the beneficiaries, in inherited IRA accounts, all done before the end of this year. At least that is the intent.

So, this action will eliminate the need for an RMD for Wayne. Is this correct? No RMDs have been done for Wayne in 2022 and 2023. I believe he did one in 2021, but probably not for the correct amount. Out of my control.

Liquidating the asset is the problem, as the account is held/operated by Directed IRA and the asset is gold coins held in a depository in Delaware.

No RMD was taken in 2022 by his father and nothing has been taken yet for 2023.
I believe the IRS has waived requirements for RMDs for 2021 and 2022 due to pandemic, etc.
Is that true?

I am asking if an RMD is required in 2023 or if the RMD is not required because the IRA will
be distributed to the heirs in the next 60-days.”

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Permalink Submitted by Alan - IRA critic on Thu, 2023-07-13 02:06

The beneficiaries are jointly responsible for completing the IRA owner’s 2022 year of death RMD, and that deadline has passed except for any beneficiaries who extended their 2022 return. Their deadline is 10/15. Otherwise the year of death RMD is late and after it is completed a Form 5329 must be filed to request a waiver of the penalty for being late.
Even if the inherited IRA can be assigned out of the estate to the estate beneficiaries as separate inherited IRAs, the 2023 RMD is based on the decedent’s single life expectancy with the divisor for 2023 being 1.0 less than the divisor based on decedent’s age in 2022. Assignment out of the estate to separate inherited IRAs does not change the RMD divisor for 2023 and beyond.
The 2022 RMD waiver only applies to beneficiaries under the 10 year rule, not to owners so this is irrelevant here. The 2022 late RMD is that of the deceased owner.
It will be simpler if the individual beneficiaries distribute their 2023 beneficiary RMD from their new inherited IRAs rather than having the estate take it and pass it through.
The gold holdings will have to be liquidated in the current inherited IRA by the estate, then that inherited IRA in cash will have to be transferred to new inherited IRAs for the estate beneficiary. The self directed IRA custodian may not cooperate with the assignment of separate inherited IRAs out of the estate. If that occurs, the inherited IRA for the estate must be transferred to a new custodian who will cooperate with assignment since the estate will have to close at some point.