Co-Beneficiaries of Inherited IRA – who claims RMD for 2008
Mother-in-law 85 passed away 10/04/08 – Two sons are co-beneficaries of IRA (My husband and brother-in-law). Her RMD for 2008 had not been taken prior to her death. She has been taking her RMDs yearly since age 70.5. I understand this RMD needs to be done prior to 12/31/08. Is it something that has to wait until Probate is completed or can this be processed now?
Question: Is this done before account is transferred (trustee-to-trustee) to two separate inherited IRAs (one each son)? Can this be done by each son taking 50% of the RMD or can just one son take the full amount to satisfy her RMD for 2008.
If can be done 50-50 will there be two 1099s issued.
Trying to figure out the order of getting this process completed.
Thanks
Permalink Submitted by mk foss on Tue, 2008-10-21 21:09
If the two sons are beneficiaries of the IRA, the probate does not control the situation. The Mother’s RMD must be withdrawn by 12/31/08. The 1099 should be issued in the name of whomever received the distribution. If it’s 50-50, there should be two 1099s. I say should because there are always custodians who can surprise you with their paperwork.
If the probate estate is actually the beneficiary and the two sons are the beneficiaries of the estate, the probate will be a factor. It might take court approval to withdraw from the IRA before the probate is complete.
The mother’s RMD is taxable to whomever receives it and the 1099 should have the name and SSN of that person and not the mother.
Permalink Submitted by Anonymous (not verified) on Tue, 2008-10-21 22:05
mgtf4cpa – Thanks for your response —
BTW – Both sons are named as beneficiaries of the IRA (50% each) & also both are co-executors of the Will & 50% ownerships for all other assets which will go to probate
Just an add’l question — Is the mother’s RMD amount for 2008 taken AFTER the transfer to the new inherited IRAs or is it distributed PRIOR to changing ownership?
Thanks
Permalink Submitted by Alan Spross on Tue, 2008-10-21 22:30
Either way, but whoever takes the RMD, it is still part of the calculation of the remaining interest in the account. For example, if taken by one beneficiary before separate accounts are created, then the other beneficiary has a greater than 50% interest in what is left. The IRA custodian must keep track of the respective remaining interest.
If the separate accounts are created first, then this accounting challenge is eliminated. The beneficiaries could agree on how they will split up the RMD, eg each take 1/2 the remaining RMD or one of them take the entire amount. The IRS does not care as long as the RMD comes out. Each will be taxed on the amount they actually receive.
If separate accounts are created no later than 12/31/09, each beneficiary can use their own non recalculated life expectancies starting with the 2009 RMD. Finally, the decedent’s prior tax returns should be checked to see if there is any basis from Form 8606 remaining that will pass proportionately to each beneficiary, and each beneficiary should name their own successor beneficiary ASAP and understand that they can only change IRA custodians by direct transfer, NOT by rollover.