IRA Divisor – complex inherited IRA issue
Here is a brief summary:
• Husband died in 2013 and had a 401k and IRA with his wife as primary beneficiary, and no contingent beneficiary.
• The wife never took ownership of his accounts upon his death.
• The wife died in 2014 and she also had an IRA with no beneficiaries named.
• After the wife’s death, the custodian of the accounts combined them all into an estate IRA.
• The custodian then divided the estate IRA into four separate Inherited IRAs for the beneficiaries of the estate.
The client provided documents showing 12/31/2014 balances for the 401k and each IRA before they were consolidated, so we were able to calculate the 2015 RMD accurately, based on each original depositor’s date-of-death. (2 divisors were used)
Since the husband and wife’s accounts were combined and then divided for each ultimate estate beneficiary, what divisor should be used to calculate the 2016 RMD?
Permalink Submitted by Alan - IRA critic on Tue, 2016-03-08 23:42
The lowest one. If inherited accounts with different divisors are combined, then the lowest divisor applicable to any portion of the account (highest distribution) must be used for the entire account. If the wife was much older this could be costly (assume both passed after RBD). In addition, the estate is responsible for the 2014 year of death RMDs.
Permalink Submitted by Patrick McGinty on Wed, 2016-03-09 14:31
Excellent, that is exactly what we were thinking. It’s an unfortunate series of events for sure; thank you again for your help.