Inherited IRA’s
For a client over 70 1/2 years old who has passed away- does the RMD for that year have to be taken out prior to it be transferred to an inherited IRA?
What if the IRA is transferred to an inherited IRA before the RMD is taken- how can the RMD be taken so they do not run into a problem of not having the RMD ditributed and reported?
Permalink Submitted by Alan - IRA critic on Sat, 2014-10-25 01:06
The uncompleted RMD of the decedent can be taken either before or after a transfer of the inherited IRA to another custodian. If the account is remaining with the same custodian, it must be re titled as an inherited IRA before the beneficiary can take any distributions at all.
Permalink Submitted by John Gajkowski on Sat, 2014-10-25 10:43
Thanks for the response. Is there somewhere I can reference this for the client and their accountant?
Permalink Submitted by Alan - IRA critic on Sat, 2014-10-25 22:38
Per IRS Reg 1.408-8 Q 8, a transfer can be done without the RMD being completed. Transfers are not distributions. If a distribution was taken, the RMD would automatically be applied. Same rule as for IRA owners. An IRA custodian cannot force out the RMD, and further under the RMD aggregation rules the RMD can be taken from any IRA account. A beneficiary can aggregate RMDs from different IRA accounts inherited from the same decedent. The IRS only cares that the RMD is taken by the deadline, and not before.