RMD from Deceased IRA owner!!
I[b] need help asap from the community on this issue.[/b]
Scottrade will not distribute the 2010 RMD of the deceased owner of an IRA to the surviving spouse as sole beneficiary unless she opens an inherited IRA and elects to make the RMD from this inherited IRA. (There had been no RMD for 2010 by the deceased owner prior to his death.) I have tried to explain to Scotttrade that the sole spousal beneficiary can make a request for the RMD from the deceased owner’s IRA directly to satisfy the RMD requirement for 2010. She can then request that the entire remaining balance of her deceased husband’s IRA be rolled over into her IRA from which she will then continue to take her RMD in the future.
I have researched this and feel that I have the correct position but I could be wrong. I hope someone in the community can cite the correct IRS regs regarding this issue. If you can please do so and give me the ammo I need to convince Scottrade to correct its position. If I am wrong I need to know precisely how to effect the RMD for the deceased spouse and then to roll the balance to the surviving spouse’s IRA.
Permalink Submitted by Alan Spross on Thu, 2010-03-25 22:25
You are correct about her options, but what you are encountering from Scottrade might just reflect the mechanics of their IRA platform. They might require a new IRA account number instead of continuing to use the same account after re titling the account. Or, they might simply mean that the current account must be re titled in beneficiary form before they can release a distribution of any type, RMD or otherwise.
The IRS Reg. that applies to this only says that the RMD for the year the owner died must be the decedent’s RMD for that year even if the surviving spouse rolls the account over. The IRS Regs do not get into mechanics and are fixated only on the actual correct amount of the RMD. The Regs do not even specify that the RMD must be taken before separate accounts are created or afterward. The IRS just wants the taxable income and the income and distribution must be made to the beneficiary, not to the decedent’s estate as some of the IRA custodians seem to want to do.
The sole beneficiary surviving spouse could therefore simply ask for a total distribution and roll over the balance net of the decedent’s RMD, which may be the easier way to go if they do not want to go through Scottrade’s administrative requirements.
I will add the IRS Reg on this issue in awhile, but it will not address the underlying mechanics of re titling the IRA prior to distributions.