RMD after death
A client’s sister passed away early in 2014 at the age of 82. The deceased sister had a 403(b) which was then changed into an inherited 403(b) in my clients name. An RMD was not taken from the 403(b) prior to the sister’s passing or prior to being transferred into my clients name. What is the best way for the RMD to be handled so the deceased sisters estate does not have any issues?
Permalink Submitted by Alan - IRA critic on Wed, 2014-11-12 04:19
Once the sister passed, the responsibility for the RMD becomes that of the beneficiary. If the sister owned any other 403b plans her RMD can be aggregated and the subject plan would not know if there were other such 403b plans that could have satisfied the year of death RMD. They should check with the client and or executor to determine if there were such other plans. If not, then the plan would push the year of death RMD out to the client and it would be reported on the client’s tax return, not on the estate tax return and not on the sister’s final income tax return. Client could then a direct rollover to an inherited IRA and either take RMDs from the inherited IRA using client’s single life expectancy or if client is older than sister, using the sister’s remaining life expectancy. Client also has the option after completing any RMDs required to to a direct rollover of the inherited 403 b to an inherited Roth IRA, and that would be a taxable direct rollover.