Beneficiary RMD in year after death
Facts:
1. Multiple Individual (Non Spouse) Beneficiaries
2. IRA has not been separate share Decedent IRAs yet
3. 1st RMD is distributed based on the oldest beneficiary’s life expectancy
Question:
Can separate share Decedent IRAs still be established prior to 12/31 of the year after death and allow each beneficiary to take future rmds based on his /her life expectancy or would the beneficiaries be required to use the “oldest” beneficiary’s life expectancy going forward?
Permalink Submitted by Alan Spross on Wed, 2011-07-27 18:19
Yes, the separate beneficiary IRA accounts can be established by 12/31 of the year following the year of owner’s death, and then each beneficiary can take RMDs based on their own life expectancies. If the separate accounts are established after that date, then all beneficiaries must use the life expectancy of the oldest IRA beneficiary for all beneficiary RMD years.
Permalink Submitted by [email protected] on Wed, 2011-07-27 19:18
Just confirming… Even though the 1st RMD was distributed based on the oldest beneficiary’s life expectancy, the future RMDs can be distributed based on the life expectancy of each beneficiary if the IRA is separated prior to 12/31 of the year after death, Correct?
Permalink Submitted by Alan Spross on Wed, 2011-07-27 19:56
Yes.
For 2011 this just means that 2 of the 3 beneficiaries took out more than they needed to, and since none of these funds can be rolled over, they are just stuck with these distributions. The two younger ones will have to determine new divisors for 2012. To do this, they should determine what their divisor WOULD have been for 2011 and then reduce that divisor by 1.0 for 2012 and each year thereafter. The oldest one just needs to reduce the 2011 divisor they all used by 1.0 for 2012 and each year thereafter.
Permalink Submitted by Edward Czapor on Thu, 2011-07-28 02:39
Alan,
What if only one of the younger beneficiaries established a separate account by 12/31 (or are three separate accounts required). Could the one separate account then use their own life expectancy, while the other accounts used the oldest life expectancy.
Ed C.
Permalink Submitted by Alan Spross on Thu, 2011-07-28 04:06
Ed, that is correct.
If 2 of them established separate accounts and the 3rd did nothing, the 3 rd would also have a separate account due solely to the actions of the other two.