RMD after death of 79 year old
client died this year and only took half of her RMD. She was 79 and the two beneficiaries are her children 50/50. As I understand it, they will have to take the remaining RMD before 12/31. Do they do this before the account is set up as an inherited IRA or can they do it after it’s been set up as an inherited IRA and then take the RMD?
Permalink Submitted by Alan Spross on Tue, 2010-09-28 17:29
Either way will work. The IRS only cares that the RMD is completed by the beneficiaries before year end. Even if they didn’t get to it until next year, they probably could get the penalty waived, but no sense delaying if they are in a position to get the RMD completed. The IRA custodian may recommend one option over the other, but if one of the beneficiaries needs a large distribution, that beneficiary could satisfy the RMD and save the other from RMDs until next year. First, I would determine if both beneficiaries want to maximize the stretch.
Perhaps the safest option is to have the RMD completed prior to separate account creation with an equal share to each beneficiary. Then everyone knows that the RMD has been distributed, and each beneficiary can move on with separate accounts afterwards and do not have to take another RMD until the end of 2011.
But the most vital thing they need to realize is that funds can only be moved between custodians by direct transfer. If either of them receives a check it is an irrevocable taxable distribution without chance of rollover. Other important items are for each of them to name their successor beneficiary ASAP, and also to determine if they inherited any basis from their mother that would make their distributions less than 100% taxable.