inherited ira
Mom died 5-2011 with an IRA with husband as primary bene followed by kids as 50/50 contingent ( son and daughter). Mom passes and dad doesn’t put it in his name, just leaves it in moms name and than father passes Oct 2012. Upon passing kids get the inherited IRA. Son is 49 and daughter is 53. Son is being told that he must take his RMD based on his fathers age because the original IRA from mother never passed to spouse.
Need to know should the IRA RMD be based on fathers age because of the circumstances or just the sons age. The RMD will be much smaller with the son age than the fathers age who was 85 upon passing.
Need help
Permalink Submitted by mk foss on Thu, 2013-12-26 19:52
Because his father did not roll over his wife’s benefit, his life expectancy is used for RMDs. The father was 85 when he passed away in 2012. The factor for the 2013 RMD is 6.6 for the two children; for 2014 it is 5.6 and so on – the factor decreases by 1.0 per year. If the father had rolled it over and named the children as beneficiaries, they would each be able to use their own life expectancies.
Permalink Submitted by Alan - IRA critic on Fri, 2013-12-27 02:07
There is a rule (See IRS Reg 1.408-8 Q 5 b) that if a sole surviving spouse beneficiary fails to take an RMD required as a beneficiary of the deceased spouse’s IRA under Sec 401(a)(9)(B), then the surviving spouse defaults from a beneficiary to ownership status. In this case if Dad did not complete Mom’s RMD for 2011 as required of him under 401(a)(9)(B), then he defaults to ownership status. But even if he defaults to ownership status, unless he has named the children as his successor beneficiaries of the IRA, the children cannot be treated as designated beneficiaries unless the IRA agreement specifies that they are default beneficiaries in this situation.
There are a number of contingencies here that have to fall into place, and even if they do, good luck in explaining this to the IRA custodian. In reality the custodian does not have to agree, and if they try to force an incorrect RMD on the children, they should transfer the IRA to another custodian.
Permalink Submitted by Jose Morales on Fri, 2013-12-27 17:55
Ultimately it is no one’s responsibility to determinine a beneficiary’s distribution method or amount but their own. However with the reality that almost all beneficiaries assume this responsibility belongs to the custodian/trustee many custodians/trustees will impose the most conservative distribution methods/calculations on inherited IRAs that they hold. Aside from determining what the actual proper course of action is, if they are willing to express a desire to take 100% of the responsibility for determining the calculation method and calculating the amount with no obligation to receive assistance from the custodian/trustee, most likely in writing, I don’t see why the custodian/trustee should object. If they are relying on the custodian/trustee to place their stamp of approval on any calculation method and calculated amount, then they leave themselves with no option but to accept what the custodian/trustee provides.