RMD after death
The owner of a traditional ira died in March of 2011. There were no RMDs made for tax year 2011. Does the RMD have to be paid to the owner (or estate) prior to the distribution to the 3 beneficiaries? I am being told that once the owner is deceased, the only payments can be made are to the beneficiaries? I need help with this.
Permalink Submitted by Alan Spross on Wed, 2011-05-04 19:37
It is correct that the RMD balance for 2011 based on the owner’s RMD must be paid to the beneficiaries. The payment only goes to the estate if the estate is the named or default beneficiary on the IRA. Therefore, the first distributions to beneficiaries are deemed to apply to the RMD of the decedent for 2011. These RMDs are taxable to the beneficiaries that receive them.
The beneficiaries can create separate accounts for themselves before taking that RMD as far as the IRS is concerned, but many custodians require the RMD to be paid out first. Also, they probably want the RMD to be paid proportionately to each beneficiary, but this is not an IRS requirement. If one beneficiary wants to take a large sum out anyway, that beneficiary can satisfy the entire RMD while the others wait until 2012 when they must take RMDs using their own life expectancy. Of course, doing this requires accounting to make sure that each beneficiary still receives their indicated share of the IRA.