RMD Question
Mr.A died March of 2011age 81. He had not taken any RMD’s for 2011. He left his 3 sons 3 IRA accounts. 1st & 2nd account they are primary beneficiaries. 3rd account Mr. A was the beneficiary of Mrs. A inherited IRA( we kept it that way because she was not over 70 and still not over 70 at his death). I understand that they need to take RMD’s by 12-31-2011. My question is does the distribution from Mrs. A IRA count toward the RMD’s that the sons need to take for this year?
Permalink Submitted by mk foss on Thu, 2011-11-17 20:29
You cannot combine RMDs from IRAs inherited from different individuals. The sons must take RMDs from Dad’s IRAs by 12/31/11. They don’t have to split his IRAs before 12/31/11 (they have a year), but if they do sa it will be easier to calculate the 2012 distributions bassed on their individual life expectancies.
For Mom’s IRA – there should be no RMD for 2011. Were the sons named as Dad’s beneficiaries if he should pass away before his life expectancy as determined from IRS tables? If so, they would have 2012 RMDs based on Dad’s life expectancy – as a spouse he could recalculate so it would NOT be Dad’s age the year after Mom died. If the sons were not named by Dad, the IRA uses whatever default beneficiary the plan document provides. It could be Dad’s estate being subject to RMDs on that account starting next year.
Permalink Submitted by Alan Spross on Thu, 2011-11-17 23:45
It appears that the sons qualify for designated beneficiary treatment (instead of successor beneficiary treatment) according to the following IRS Reg 1.401(9)-4:
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(b) Surviving spouse. As provided in A–5 of §1.401(a)(9)–3, if the employee’s spouse is the sole designated beneficiary as of September 30 of the calendar year following the calendar year of the employee’s death, and the surviving spouse dies after the employee and before the date on which distributions have begun to the surviving spouse under section 401(a)(9)(B)(iii) and (iv), the rule in section 40l(a)(9)(B)(iv)(II) will apply. Thus, for example, the relevant designated beneficiary for determining the distribution period after the death of the surviving spouse is the designated beneficiary of the surviving spouse. Similarly, such designated beneficiary will be determined based on the beneficiaries designated as of the date of the surviving spouse’s death and who remain beneficiaries as of September 30 of the calendar year following the calendar year of the surviving spouse’s death. Further, if, as of that September 30, there is no designated beneficiary under the plan with respect to that surviving spouse, distribution must be made in accordance with the 5-year rule in section 401(a)(9)(B)(ii) and A–2 of §1.401(a)(9)–3.
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In this case, the surviving spouse passed before RMDs were to begin, so if the surviving spouse named the sons as successor beneficiaries, they effectively become designated beneficiaries when the surviving spouse passed. Therefore, they are allowed to use their own life expectancies, create separate accounts etc. Also, see A-5 of 1.401(a)(9)-3:
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Q–5. If the employee’s surviving spouse is the employee’s sole designated beneficiary and such spouse dies after the employee, but before distributions have begun to the surviving spouse under section 401(a)(9)(B)(iii) and (iv), how is the employee’s interest to be distributed?
A–5. Pursuant to section 401(a)(9)(B)(iv)(II), if the surviving spouse is the employee’s sole designated beneficiary and dies after the employee, but before distributions to such spouse have begun under section 401(a)(9)(B)(iii) and (iv), the 5-year rule in section 401(a)(9)(B)(ii) and the life expectancy rule in section 401(a)(9)(B)(iii) are to be applied as if the surviving spouse were the employee. In applying this rule, the date of death of the surviving spouse shall be substituted for the date of death of the employee. However, in such case, the rules in section 401(a)(9)(B)(iv) are not available to the surviving spouse of the deceased employee’s surviving spouse. (((Pub 590 version of this is on p 36, “Death of Surviving Spouse”)))
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Note: Despite the fact that the surviving spouse is treated as the employee (or IRA owner) for their beneficiary’s RMD treatment, that does not make the surviving spouse the owner of the IRA in the year of death for purposes of their own RMD. Therefore, I agree that for IRA AC #3, there is NO RMD for 2011, but there is for the other two accounts.