RMD after Husband dies 2009 and Father dies 2010
[b][u]Facts[/u][/b]:
Client is woman who turns 58 in 2010. Her husband died in 2009 at age 73. In 2009 Client rolled over the proceeds of husband’s Traditional IRA to a newly established Beneficiary IRA (call this BENE IRA 1) so that she could withdraw funds prior to her age 59.5 and not incur 10% penalty. Her plan was to rollover the proceeds of BENE IRA 1 to her existing Traditonal IRA after she turns 59.5.
Client’s father, age 85, died February 2010. Client is beneficiary of her father’s Traditional IRA. Client desires to rollover the proceeds of her deceased father’s Traditional IRA into a newly established beneficiary IRA in 2010 (call this BENE IRA 2). In 2010 Client also desires to rollover the proceeds of BENE IRA 1 to her existing Traditional IRA.
So far in 2010, no distributions have been taken from either BENE IRA 1 or the deceased father’s Traditional IRA.
[b][u]5 Questions[/u]:[/b]
1. Is an RMD necessary in 2010 from BENE IRA 1?
2. If answer to 1. above is YES, am I correct that the RMD must be taken BEFORE the rollover to Client’s Traditional IRA?
3. Is an RMD necessary in 2010 from deceased father’s Traditional IRA?
4. If 3. above is YES, does the RMD have to be taken before the rollover to BENE IRA 2 takes place?
5. Is an RMD necessary in 2010 from BENE IRA 2?
Thanks for everyone’s help!
Permalink Submitted by Alan Spross on Tue, 2010-03-09 02:47
1. Is an RMD necessary in 2010 from BENE IRA 1?
Yes, unless she rolls it over prior to year end. And if she does nothing, she is deemed to have assumed ownership by failing to take the RMD as beneficiary. After rolling over the bene IRA, she is deemed to have owned the IRA all year for RMD purposes, and she does not have to take RMDs.
2. If answer to 1. above is YES, am I correct that the RMD must be taken BEFORE the rollover to Client’s Traditional IRA?
See above. No RMD required UNLESS she does NOT want to assume ownership.
3. Is an RMD necessary in 2010 from deceased father’s Traditional IRA?
Yes, to the extent he did not take RMD before passing. The RMD is what her father’s RMD would have been for 2010. After taking the RMD, any change of custodian must be done by direct transfer only.
4. If 3. above is YES, does the RMD have to be taken before the rollover to BENE IRA 2 takes place?
It should be, but can also be taken from the transferred BENE IRA at new custodian. Most important is that it is taken by year end 2010.
5. Is an RMD necessary in 2010 from BENE IRA 2?
Not if taken prior to transfer. Starting in 2011, RMDs from BENE IRA 2 will be based on client’s non recalculated single life expectancy. This inherited IRA can never be combined with an IRA inherited from a different decedent.
Permalink Submitted by Anonymous (not verified) on Tue, 2010-03-09 02:51
I’ll try to take a stab at this and see if everyone agrees:
1. There was no RMD requirement for her husband while living for 2009, since we had a waiver for 2009. When she established Bene IRA #1 RMDs do need to be taken by 12/31/2010, but if she assumes before that she will need to do nothing (She is 58 and can wait until she turns 70 1/2). By doing this, she will need to wait until she actually turns 59 1/2 to avoid the penalty – 2011 or 2012 I presume?
3. The desceased father was already in RMD age so he would have needed to satisfy 2010 RMD. If not, she Inherits and must satisfy his RMD as if he was living – this can be done before or after she actually Inherits. Many companies will have different processing procedures, but all will code the distribution under [u]her[/u] SSN.
4. Answer was Yes. Again, this does not really matter and she even has the option to wait until the last day of the year under the Bene IRA #2 if she wants. It is taxed to her regardless.
5. No. The “Final RMD” is the only requriement. In 2011, normal LE RMD will need to continue for her age.
Hope this makes sense.
pko