RMD in year of death
Decedent did not meet RMD for 2012. He had an IRA (bene = Trust) and a 401k (bene = 1/2 wife, 1/2 Trust).
To satisfy the 2012 RMD, does it matter who receives the distribution or which account the distribution is from?
I am thinking that the Trust as a separate legal entity should receive its portion of the 2012 remaining RMD from either the IRA or its portion of the 401k and the wife should receive her portion of the remaining RMD from the the 401k account transferred to her. However, I believe the Code mentions that “a beneficiary” must receive the remaining RMD without specifically mentioning that all beneficiaries need to receive the RMD. Are we able to issue all of the 2012 RMD to the wife, trust, or both?
What happens if the IRA or 401k has not been transferred to the bene? How is the remaining RMD reported? I am thinking a 1099 gets reported to the decedent or his estate with code “4” which is a distribution due to “death”. Is this accurate?
Thank you.
Permalink Submitted by Alan Spross on Mon, 2012-12-10 16:54
The uncompleted part of the year of death RMD should be paid to the beneficiary of each account prior to 12/31. Each account must satisfy it’s own RMD requirement. While either the spouse or the trustee of the trust could request the 401k year of death RMD, the accounting that would result from that will probably result in the 401k wanting to split the RMD equally between the two. But the IRS does not care how it is split.
In summary:
1) IRA RMD must be all paid to the trust
2) 401k RMD must be paid in total but the split between the spouse and the trust can be done in the amounts they wish. 50-50 would be simpler but is not an IRS requirement.
The death certs and other paperwork must be completed and accepted before any distributions can be made. It is commonplace not to get this completed by the end of the death year, and the IRS will usually waive any penalty if those RMDs are not distributed until the following year. Form 5329 needs to be filed to request the penalty waiver on the beneficiary returns. All such RMDs are taxable in the year distributed and reported by the beneficiaires that receive them. No post death distribution made or reported by the decedent or the estate unless the estate is the actual beneficiary. Code 4 will show on all death distributions.
Note that for trust beneficiaries, paperwork must be submitted to the custodians. This is part of the requirements for a trust to qualify for look through RMD treatment which would allow the trust RMDs in the future to be based on the oldest trust beneficiary instead of treating the trust like a non individual beneficiary. See those requirements on p 36 of Pub 590.
The wife will be able to either create an inherited IRA to receive her shares of the 401k death benefits or roll her half of the 401k to her own IRA. What is best depends on both the ages of the decedent and the wife.