In an RMD due?
A clients 40 yo daughter died in April of 2012 with 62 yo father as the beneficiary on her IRA. He inherited it and invested it into a beneficial IRA. Does the client need to begin taking RMDs’s in 2013 or can he wait 5 years? If he does begin taking RMD’s does the account need to be distributed over 5 years?
Permalink Submitted by Alan - IRA critic on Fri, 2014-01-10 18:40
He can elect either the 5 year rule or his life expectancy using his attained age in 2013. Most IRA agreements default to life expectancy RMDs for the beneficiary. If he distributes nothing in the first 5 years, under a life expectancy default, he can restore life expectancy by making up the missing annual RMDs and paying the penalty for missing those RMDs (PLR 2008-11028). If does not want to do that, he can elect the 5 year rule under which there are no annual RMDs, but the entire IRA must be drained no later than 12/31/2017. Even if he wants to elect the 5 year rule, his taxes would be leveled out if he took out about 1/6 the balance in each of 6 calendar years starting in 2012.