died before taking RMD
What is the proper procedure to follow when an IRA owner dies prior to taking the RMD for the year? For example, if the owner’s children are the named beneficiaries, do they take the RMD, does the estate, etc?
Thanks!
What is the proper procedure to follow when an IRA owner dies prior to taking the RMD for the year? For example, if the owner’s children are the named beneficiaries, do they take the RMD, does the estate, etc?
Thanks!
Permalink Submitted by Peter Lingane on Fri, 2011-02-04 16:53
See the discussion in Choate (2011) at 4.1.05.
Permalink Submitted by Jason Frank on Fri, 2011-02-04 18:26
Sorry for being slow. Is that a reference to a book?
Permalink Submitted by mk foss on Fri, 2011-02-04 18:27
The named beneficiaries must take the decedent’s RMD for the year of death. This rule seems to confuse many – often the custodian is confused and will have the check issued to the decedent or to the decedent’s estate. In that case, the check should be returned and the custodian referred to IRS Pub 590 or Natalie Choate’s excellent book.
It is still possible for a beneficiary who has taken the decedent’s year of death RMD to disclaim his/her interest in the IRA according to a 2005 ruling. See Rev Rul 2005-36 if you’re interested.
Permalink Submitted by Alan Spross on Fri, 2011-02-04 20:17
Jason,
Note that different rules apply if the RMD for the year of death is for the year prior to the required beginning date (RBD) or prior to 4/1 of the RBD year. The basic IRA rules applying to beneficiaries vary according to whether the IRA owner passed prior to the RBD vrs on or after the RBD.
Example: IRA owner died at age 71 in the same year they turned 70.5 and left the IRA to the children. This is prior to the RBD. There would have been an RMD due for this year by the RBD if the owner had lived, but passing prior to the RBD eliminates the RMD requirement for that year. The children must take their first RMD no later than the end of the year following the year of death and that RMD is for the year following the year of death. There is no RMD for the actual year of death.
If the owner passed on or after the specific RBD, then the children must take the RMD for the year of death that the owner did not. This RMD is not paid to the estate unless the estate is named as the IRA beneficiary or becomes the default beneficiary under the IRA agreement. The income is reported by the taxpayer that receives the payout. If the children receive the payout directly, they report the income on their own returns, and the RMD does not go through the estate or appear on the decedent’s final tax return.