calc successor Bene IRA RMD…

Submitted by Wendy Mommaerts on Mon, 2015-07-27 16:20

we have a client that inherited his mother’s Bene IRA (mother inherited the IRA from her husband. It is our understanding that our client will need to follow his mother’s RMD schedule. I feel our calculations are not correct….we have the client w/drawing $619.80 for 2015…

Father (IRA Owner)
Birth date: 11/3/1936
Date of death: 9/30/2002

Mother (Kept the IRA as a Bene IRA)
Birth date: 12/8/1937
Date of death: 3/12/15

2014 YE Value $17,230.60



Submitted by Alan - IRA critic on Mon, 2015-07-27 17:50

  • You are correct. 619.80 is way off and I cannot figure out what error was made in reaching that figure.
  • Assuming mother was sole beneficiary of father’s IRA, her first RMD would be due in 2007, the year he would have reached 70.5. She would be age 70 in that year, and should have rolled it over to her own IRA by then to reduce RMDs and protect the stretch for her beneficiary. But if she took Table I beneficiary RMDs, she would re enter Table I each year and the 2015 divisor would be 11.4 producing a 2015 RMD of 1,511.46. Client would have to continue mother’s RMD calculation except that the divisor would be reduced by 1.0 each year. The divisor would then be 10.4 in 2016. 9.4 in 2017 etc.
  • There is another possibility here – the default rule that states if a spousal beneficiary fails to take the full RMD required as a beneficiary, they default to ownership of the IRA, and the Uniform Table would then apply, lowering the RMD. If this happened, it would be good for the client because they would then be considered a designated beneficiary and could use their own life expectancy. This may have occurred here since the 619.80 figure is way short. And if this IRA defaulted to mother’s own IRA, and RMDs were still deficient, the client is only responsible for the year of death RMD, not for prior year shortfalls. If we assume that mother actually owned this IRA under the default rules, her 2015 RMD divisor would be 20.3 (age 78) and the RMD would be 848.80. Then client would use their own age starting in 2016 and would have a decent stretch.
  • In summary, some research is needed to determine whether the default rule was triggered or not.

Submitted by David Mertz on Mon, 2015-07-27 18:05

One thought that came to mind after our previous discussion was whether or not the default rule could be triggered by the mother’s inherited IRA year-of-death RMD not being satisfied by the beneficiaries of that IRA.  I think the answer is No since the rules seem to say that these beneficiaries must complete the RMD, but this is not entirely clear.

Submitted by Alan - IRA critic on Mon, 2015-07-27 20:29

DMx – I agree the answer is No. Default to ownership can only be triggered by an RMD shortfall of the spouse. When the spouse passes, there is no spousal shortfall because the spouse had until 12/31 to complete the RMD. The RMD is not delinquent until 12/31 but as you indicated the responsibility for that RMD passed to the beneficiaries upon death of the spouse, so if there is an RMD shortfall at year end, it was caused by the beneficiaries, not the spouse. Therefore, the spouse cannot default to ownership posthumously even if the beneficiaries fail to complete the RMD, including intentionally failing to do so to enhance their stretch.

Submitted by David Mertz on Mon, 2015-07-27 17:59

  • Alan and I had a discussion about this (I thought it was an interesting scenario) when you previously posted (with a different YE value):  https://irahelp.com/forum-post/25110-bene-calculation .  Because the mother was the sole beneficiary of her husband’s IRA, she was allowed to re-determine her life expectancy each year instead of using the reduce-by-one method.  Since she would have been 78 on her 2015 birthday, the life expectancy from Table I to be used in determining her 2015 RMD is 11.4, resulting in an RMD of $1,511.46 based on the 2014 YE value of $17,230.60.
  • The beneficiaries of the mother’s inherited IRA will reduce the 11.4 divisor by one each subsequent year (10.4 for 2016, 9.4 for 2017, etc.)

Submitted by Wendy Mommaerts on Mon, 2015-07-27 18:23

I previously had a higher YE value for 2014 which was the mother’s YE value….Our client has since received his portion of the Bene IRA so when I posted this question I used his portion of the ’14 YE Value.  Our back office has come up with the figure I am not sure of.  I too have come up with the figure you came to….(the mother did not miss any RMDs).  It was my understanding the our client will need to follow his mother’s RMD schedule and not decrease by 1 each year.  Which would mean he would use 10.8 for 2016

Submitted by Alan - IRA critic on Mon, 2015-07-27 19:16

No, only a sole spousal beneficiary can “re calculate”, ie. re enter Table I every year. A non spouse beneficiary including a successor beneficiary of the second spouse to pass must apply the 1.0 reduction starting in the year following the year of death (see Pub 590 B p 10 “Spouse as sole designated beneficiary”. 

Submitted by David Mertz on Mon, 2015-07-27 19:55

Since the mother’s year-of-death RMD can be satisfied by distributions of made by the beneficiaries in any combination, is it possible that your client’s portion of the RMD determined by your back office was based on some other beneficiary making a distribution of more than their “share” of the RMD?  I suspect not since the amount that the back office came up with seems to have been determined using a nice round divisor of 27.8, but I thought I would ask.  Perhaps the back office used the Table I age 44 life-expectancy reduced by 12 (which, of course, is not appropriate to use since your client is a successor beneficiary).  Was your client age 44 in 2003?

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