Beneficiary IRA – Beneficiary’s Responibility

Submitted by Glenn Andrade on Mon, 2017-09-11 16:07

I’m working with 2 children of a client. Client passed away last month…still needing to take $65,000 in RMD from his IRA. My understanding is that I need to fulfill the Beneficiary designation (50% to each child), and from there…they must take the RMD. My question is what happens if I split the account, and one beneficiary takes his/her RMD ($37,500), and the other doesn’t? Who gets penalized? Is there any blowback on the beneficiary that DID take his/her RMD?



Submitted by Alan - IRA critic on Mon, 2017-09-11 17:18

HIghly unlikely that this beneficiary has anything to worry about. The year of death RMD is a joint responsibility of the beneficiaries, meaning that the 65k could be distributed in any combination to the two. However, there is no indication that the IRS has ever penalized a beneficiary that distributed their ratable share of the year of death RMD. If the IRS goes after the 50% excess accumulation penalty, it is almost certain that only the other beneficiary will be assessed, and not the child who distributed 50% of the year of death RMD.

Submitted by Ben Meyer on Tue, 2017-09-12 05:00

  • It would be beneficial if you could provide guidance in writing for both of the children to advise them that each of them is required to take a distribution this year.  If possible, both of the children should confirm that they understand and will take the specified amount as a minimum this year.  An agreement of this sort would be useful later if there is an IRS audit.  You can also prepare the needed distribution forms and furnish them to the two children to facilitate their distributions.  Your instructions can also tell them about the RMD starting next year so that they are fully informed.
  • There seems to be something amiss with the numbers in your posting.  The RMD amount of $37,500 is half of $75,000, not $65,000.

 

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