Bene RMD

Submitted by Wendy Mommaerts on Tue, 2013-01-08 20:44

We currently have a Bene IRA in the name of a trust with 5 beneficiaries…can you please confirm that we are calculating the Bene RMD’s correctly.

Owner’s Birth date 05-22-1935 date of death 1-3-2011 -birth date of the oldest beneficiary is 6-3-1930.

2012 RMD in the amount of $16972.81 was based off of 2011 YE Value $154452.60 single life factor of 9.1.

2013 RMD in the amount of $18630.21 is based off of 2012 YE Value $150904.71 using a factor of 8.1 (Decreased the previous year by 1)

RMD calculators come up with a 2013 RMD of $14103.24

Any assistance would be greatly appreciated!
Thanks,
Wendy



Submitted by Alan - IRA critic on Tue, 2013-01-08 22:06

  • In this case, where the owner passed after the RBD and the oldest beneficiary of the trust is older than the decedent, it does not matter if the trust is qualified for look through treatment. The RMD is based on the age of the decedent, who would have reached 76 at the end of 2011 and was younger than the oldest trust beneficiary. Single life table divisor is 12.7 for year of death and is therefore 11.7 for the 2012 RMD, 10.7 for the 2013 RMD etc. The calculator is therefore correct. You were using the correct year end values, but the wrong life expectancy.
  • Since owner passed on Jan 3rd, they most likely did not complete the 2011 RMD, and the trust is responsible for taking the 2011 RMD of the owner based on the 12/31/2010 balance and a divisor of 22.0 from the Uniform Table. To waive the excess accumulation penalty if that RMD was not taken by 12/31/2011, the trust should file a 5329 and request the penalty be waived for reasonable cause per p 6 of the 5329 Inst. With the 5329 the trustee should be able to state the amount of the 2011 RMD and the date distributed.


Submitted by Wendy Mommaerts on Mon, 2013-01-21 21:25

you are stating that the single life expectancy factor of 12.7 should have been used for the 2011 RMD (Year of death)…shouldn’t it be 22.0 (this would be the RMD amount that would have been taken if the owner was still living)  I was under the impression that we would still need to satisfy this amount and then the following year (2012) we would adjust the life expectancy factor to reflect the older beneficiary or the decedent and then decrease by 1 each year after.  If this is not correct, we would have processed the 2011 RMD incorrectly.



Submitted by Wendy Mommaerts on Thu, 2014-04-24 16:08

There are 4 beneficiaries within this trust with the oldest born in 1930…as you stated above the deceased was younger than the oldest beneficiary we will need to use the deceased age for calculating the RMDs.  My question is, when the oldest beneficiary passes away, will we need to relook at this and recalculate the RMD by using the next oldest beneficiary?  Date of Birth for the living beneficiaries:1930194019431944…..Thanks!



Submitted by Alan - IRA critic on Thu, 2014-04-24 23:48

Once RMDs begin using the age of the oldest beneficiary, the death of that beneficiary will not affect the remaining RMDs. The divisor used will continue to be reduced by 1.0 each successive year. The same would apply had the IRA been left directly to the beneficiaries without a trust.



Submitted by Alan - IRA critic on Mon, 2013-01-21 22:06

Yes, the owner’s RMD for 2011 has a divisor of 22 as indicated in my 2nd bullet point. For the 2012 beneficiary RMD, the divisor is 11.7 as indicated. In explaining the 11.7 you first need to determine that the single life table divisor for the year of death would have been 12.7, but must be reduced by 1.0 to get the 11.7 for the 2012 beneficiary RMD. The 12.7 is not actually used, but it is where you first determine from the single life table where to start to get to the next year’s (2012) RMD of 11.7. To summarize, the actual divisors that apply are 22 for 2011 (uniform table) and 11.7 for 2012 (single life table).



Submitted by Wendy Mommaerts on Mon, 2016-11-28 17:07

I would like to revisit the response I received back in 1/2013.  It stated that we use the birth date of the deceased and that the divisor for 2012 is 11.7 decreasing by 1 each year after.  the 2011 divisor is 22 then shouldn’t we be calculating 2012 with a divisor 12.1, 2013 as 11.1, 2014 as 10.1, etc…?  Normally a beneficiary would begin their RMD withdrawals the following year of the date of death which would then bring the divisor at 12.1 for 2012.



Submitted by David Mertz on Mon, 2016-11-28 18:56

  • Alan’s calculation is correct.
  • When the owner’s age is used, the instructions in IRS Pub 590 (derived from CFR § 1.401(a)(9)-5 Q&A-5) indicate to use the owner’s age in the year of death to find the divisor in the Single Life Table, then reduce by it by 1 for each subsequent year.  If distributions were instead being based on the oldest beneficiary (because doing so results in a greater life expectancy), the look-up is done using the beneficiary’s age in the year *following* the year of the owner’s death.  Perhaps the IRS thought that it didn’t make sense to use the owner’s life expectancy in the year after death since the owner is known to be dead before the following year begins.


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