Is it Better to Figure RMD Yourself or Let Custodian Do it?

Submitted by Cheryl Van Beek on Wed, 2016-12-07 14:57

• The bank is out of state and I don’t think they will accept verbal authorization. Why would that be preferable to a form anyway?
• Regarding prior answer: “By far the main pitfall here is requesting too large a distribution since there is no way to put the money back in creating a tax bill that cannot be changed.” I see your point. But if the beneficiary is specifying the exact amount to withdraw, based on the correct divisor and prior year balance of account would there be any problem? Wouldn’t that likely produce a correct RMD? If it were a little high rather than too low wouldn’t that be preferable in terms of avoiding IRS penalty?
• Or, is it generally safer to let the Custodian (a bank) figure the RMD for some reason? Certainly no one wants to pay too much in taxes, but the concern is that they will use wrong divisor as I’ve seen on other accounts in the past and the RMD will be too low. For 2016 especially, there likely wouldn’t be time to correct this before year end.
• And as to your mention of “…no need for a separate RMD form…” a separate RMD form, I think they are saying either an RMD form if the beneficiary wants to set up auto RMDs that custodian figures OR a yearly withdrawals to take RMDs annually figured by the Beneficiary.



Submitted by Alan - IRA critic on Wed, 2016-12-07 23:38

  • Very generally, inherited IRA RMDs are complex because of variations in how they were created. The simple beneficiary age and table I is not always correct. Therefore, letting an IRA custodian who is not aware of the history of that inherited IRA calculate the RMD is risky. True, they are more likely to be correct than the average beneficiary, but I think they are less likely to be correct than a knowledgeable beneficiary. The best solution for a knowledgeable beneficiary is to figure their own RMD and then ask the custodian to figure it (if they will even do it). If the figures agree, then the chance it is correct is much better than if just one party calculated it. If the figures differ, then the discrepancy should be resolved as to why.
  •  A form would be necessary if any automatic arrangements were desired. But if the beneficiary wants to manage this on their own by taking distributions in the amount and date they wish, a form would not be needed because the distributions would be distributed in the same manner as IRAs prior to any RMDs.


Submitted by Cheryl Van Beek on Thu, 2016-12-08 02:04

Thank you.



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