How to do RMD calculation as non-spouse beneficiary

Submitted by A S on Tue, 2017-10-10 00:04

So I have been told that to calculate an RMD as a non-spouse beneficiary, I need to do the following formula:
Year end value of IRA as of Dec. 31, the value that would be reported on form 5498 /Divided by my age factor in the Single Life Expectancy Table 1 Publication 590-B

I am wondering if I need to look at the exact value for the single life expectancy table for each corresponding year, or if I need to take the value of my single life expectancy for non spouse benificiary for the year after the deceased benefactor passed, and then subtract by 1.

I am also wondering if it needs to use your age by the end of the year, Dec 31, or if it needs to go to the exact month when the decadent died.

I was 20 years old when my mother passed away in January of 2008. I was 21 years old on Dec. 31 2008.
My mom had 2 IRAs I’m going to be taking RMDs from for years 2010 to 2017.

If I look at my age for year 2010 I would have been 23, so my value would have been 60.1 . If I subtract 7 from that, then my value as of 2017 is 53.1.

***However, if I look straight at the table values each year, for 2017, I am 30, and the value for someone who is 30 is 53.3, which would mean that I would be off by .2 ! ****

***So which way do I calculate the age, the year after my mom died or the year that I would first be required to take an RMD and subtract 1 for each year, or look directly at the table for each year?

Also, it appears that the Single Life Expectancy Table for non-spouse beneficiary has been exactly the same from 2008-2016. I do not see the table online yet for 2017. Can anyone else confirm that this Single LIfe Expectancy Table for non-spouse beneficiary remains the same each year?



Submitted by Alan - IRA critic on Tue, 2017-10-10 01:04

  • What is unique here is that all 2009 RMDs were waived by Congress. Therefore your first beneficiary RMD will be for 2010. Your age on 12/31/2009 is 22, and the divisor for 2009 WOULD HAVE BEEN 61.1 had the 2009 RMDs not been waived. Your actual RMDs begin in 2010, using a divisor of 60.1, and each year thereafter would apply a divisor 1.0 less than the prior year. So 59.1 for 2011 etc. proceeding to 53.1 for 2017.
  • You only enter Table I that one time, then simply reduce the divisor by 1.0 each year thereafter.
  • All RMD tables were last revised in 2002 and there is no indication when this will change. If and when it does, you would go back and reconstruct this from the beginning to get your divisor for the first year of the change of Table divisors.

Submitted by A S on Tue, 2017-10-10 05:59

Thank you so much Alan for the great advice! You seem to be extremely knowledegable about inherited IRAs, I only hope to have your knowledge someday! :)So I am trying to calculate right now my RMDs for one of my accounts. Is the balance that is reported on form 5498 the balance for the actual calendar year it corresponds to, or the balance for the prior year? For instance, one of my accounts had around 8,100 on form 5498 for tax year 2016. Does this mean the Dec. 31,2016 value of that account was $8,100?Will I then take this 2016 year end balance to use to divide against my 2017 Table 1 Divisor, which is 53.1, to calculate my 2017 RMD? So the RMD for 2017 would be $152.54?Am I getting this calculation right? I apologize if my questions are redundant. I’m in no way good at math, and I’m attempting to do all of these calculations myself rather than pay someone else $200 an hour to do it for me, even though I would prefer to have help to at least confirm my calculations are correct.

Submitted by Alan - IRA critic on Tue, 2017-10-10 16:35

Yes, your example is correct. The 2016 5498 value is used for the 2017 RMD calculation. Some custodians will just send a notice of the value rather than a 5498, but it is used in the same manner.

Submitted by A S on Wed, 2017-10-11 03:34

Thank you! I think I understand how to do it now!One additional question: Both of these 2 IRA accounts were put into my name and funded in my name as an IRA BDA in 2010. I was the original beneficiary, except for 1 account which had my grandma who passed away as the beneficiary, then it was transferred to me.***Because I did not have access to the 2009 year end values of either account and the accounts were not in my name until later in 2010, do I need to do the 2010 RMD?  

Submitted by Alan - IRA critic on Wed, 2017-10-11 04:48

I am confused about this other IRA. If you inherited an already inherited IRA, then you are the successor beneficiary on that account, not the designated beneficiary. That means that your own life expectancy does not apply and RMDs will be much higher as a % of the balance. For that IRA, you need to use the age of the first beneficiary (the designated beneficiary) for an RMD schedule and those divisors with the 1.0 reduction continue to apply to your RMDs as successor. Due to this you can never combine those two accounts because they will have different divisors. If I lost you, please post details of year of owner’s death and age of the original beneficiary in the following year and I can clarify what divisors apply.

Submitted by A S on Wed, 2017-10-11 19:17

So the one IRA I was listed as the only beneficiary. This was my mother’s account, and it has more money in it.This IRA was put into my name in 2010 and funded in 2010.The other IRA at a different financial institution did have my grandmother listed as beneficiary..BUT my grandmother had already passed away before my mom passed away and never inherited the IRA. So I was the first beneficiary of this IRA, as my mom’s only legal heir, her child. So therefore, I am the only beneficiary, and can apply it to my life expectancy I believe. This IRA was also put into my name in 2010 and funded in 2010.So again, my mom passed away in 2008. Each of these 2 different IRAs at 2 different financial institutions, were put into my name as IRA BDA and my name as beneficiary of my mom in 2010, 2 years after she passed away.So the question is, since each of these 2 IRAs were put into my name and funded in 2010, do I need to take a 2010 RMD from them? 

Submitted by Alan - IRA critic on Wed, 2017-10-11 20:27

Your GM was listed as the primary beneficiary on that IRA? Were you named as a secondary beneficiary OR did this IRA go to your mother’s estate and was then assigned to you? You indicated “as my Mom’s only legal heir” which sounds like she might have passed without a will and the IRA was assigned to you according to your state’s intestate provisions which apply when there is no will or living named beneficiary. Again, this makes a major difference in the RMD treatment, so please clarify. I assume your mother passed well before age 70.

Submitted by A S on Thu, 2017-10-12 00:27

My mother did not have a will, she passed away intestate. So I was the legal heir according to my state’s intestate provisions (first spouse, then children, and I’m her only child). I also did not go through probate as far as I am aware or any estate legal proceedings. I have a Small Estate Affidavit that I had notarized showing that her estate was under $100,000. The state in question is Washington State.I believe for the one IRA that had my grandma on it, she was the only beneficiary. But my grandmother passed away years before my mom did. When I had called to get that IRA in my name, they just asked for my grandma’s death certificate in addition to my mom’s death certificate, then it got transferred to me. My mom was 64 when she passed away in January of 2008. At the end of the year in 2008 she would have been 65.

Submitted by A S on Mon, 2017-10-16 04:07

Hi Alan,Just checking, did you see my last comment detailing that my mom did not have a will and GM had died before mom died, leaving only me as beneficiary of the one IRA? Also, that my mom was 64 in January of ’08 when she passed away, and would have been 65 by December of that year.

Submitted by Alan - IRA critic on Mon, 2017-10-16 04:51

Submitted by A S on Mon, 2017-10-16 20:53

So my mom’s estate never went through probate, and she had a small estate and no will. I recall I called the one ira company, the one that had my deceased grandma as the original beneficiary, and they had me supply my grandma’s death certificate and my mom’s death certificate then put it in my name as an IRA DBA. My grandma never received the ira at all, my mom had just forgotten to list me as the beneficiary.Would the IRS or anyone even know who the original beneficiary is for this IRA?

Submitted by Alan - IRA critic on Mon, 2017-10-16 23:25

The IRA custodian certainly knows and they should also have issued a Form 5498 showing the beneficiary starting in 2010. The IRA was likely titled to the estate for a time but was then retitled later once the estate assigned the inherited IRA to you as beneficiary under state intestate provisions. You also will not start a statute of limitations on missed RMDs unless you file Form 5329 either paying the penalty or requesting a penalty waiver as you should.

Submitted by A S on Mon, 2017-10-16 23:58

I’ve reviewed forms 5498 for 2010-2016 and I am listed as the beneficiary of the account next to my mom’s name. I’ve also seen a year ending statement (not a tax form, just a year end financial statement) of the account for 2009 and I’m listed as the beneficiary next to my mom’s name.Does this impact anything?

Submitted by Alan - IRA critic on Tue, 2017-10-17 01:28

Submitted by A S on Fri, 2017-10-20 01:03

I will have to ask my financial institution about if I was the contingent beneficiary on this IRA.Regarding the IRA that my mom held at a different financial institution. My mom has an IRA for a much higher value, around 70k, at a different institution. This particular IRA I was named the sole beneficiary by my mother. I received this particular account near the end of 2010. Will I be able to take RMDs over my life expectancy for this particular account?

Submitted by Alan - IRA critic on Fri, 2017-10-20 02:36

For the IRA you inherited directly, you would normally be entitled to use your own life expectancy for annual RMDs starting in 2010. However, I don’t think you have taken out any of these RMDs. The IRA agreement almost certainly makes life expectancy the default RMD method, and in 2008 the IRS released PLR 2008-11028 which allowed the applicant to preserve the life expectancy stretch even after not making a choice between that and the 5 year rule. That applicant had to pay the 50% penalty for each year they made up, but you can make up all the late RMDs and file a 5329 requesting that the IRS waive the 50% penalty. While 7 years of this is far more than the original PLR, the IRS will still probably waive the penalty if you make up all the missed RMDs and file a 5329 for each year requesting the penalty be waived for “reasonable cause”. See the last page of the 5329 Inst. This should allow you to continue the life expectancy stretch starting this year and into the future, although the penalty waiver is not a sure thing when this many years has elapsed. It will also take you some research to calculate what all these RMDs should have been. We covered the divisors to be used in the first few posts here, but you still need to determine what the year end values were at the end of the prior years.

Submitted by A S on Mon, 2017-10-23 23:11

I checked with both financial institutions, I was the original beneficiary for both of the IRAs and both of the IRAs are traditional IRAs.I also have the information to do the calculations and will do the individual life expectancy based on my life expectancy calculations for years 2010-2017, because of the 2009 RMD Waiver.I will then fill out a form 5329 for years 2010-2017, one form for each year, not one for each IRA, is that correct?And I will still have to do the RMDs for 2010 even though one of my IRAs was distributed to me in the end of 2010?The above 2 things are all I need clarified, otherwise I think I understand it! Thank you!

Submitted by Alan - IRA critic on Mon, 2017-10-23 23:55

Yes, you must take the 2010 RMD for both accounts. There is one 5329 per year, not one per IRA account.

Submitted by A S on Mon, 2017-11-20 21:07

I’ve done all my RMDs. But now I need to fill out 7 IRA Distribution Forms at my financial institution (the credit union/smaller account). What box should I check for the distribution reason? I am not sure if I should check a) death or b) correction of excess contribution for tax year or c) after my tsx filing due date, including extensions or d) earnings attributable in excess ?I believe I should make 7 separate transactions, one for each rmd amount for each year (2010-2017). Should I elect each transaction as an immediate, one time distribution? Should I have no tax withheld from each distribution to keep it simple, or elect to have tax withheld in my tax bracket (which is 10%)?

Submitted by A S on Mon, 2017-11-20 22:14

I’m wondering if I should have 10% tax witheld from each rmd distribution I will be taking for missed 2010-2016 years? I will be taking all distributions out in 2017. However, if I do not have tax witheld or if I do, will it affect my past filed income tax?Would it be best not to have tax withheld to keep it simple? Or will this cause more tax problems from past years?

Submitted by Alan - IRA critic on Mon, 2017-11-20 22:47

If you will be underwithheld including the distribution income, figure out how much you want withheld. You can decline withholding if you wish, or usually can choose the % you want withheld. If you do not indicate anything, they will withhold 10%. This has nothing to do with the RMD compliance or prior tax years, it just determines if you have paid enough in this year to cover your final tax bill. You should only fill out one distribution form per IRA account, not one for each year. Choose death distribution as the reason for the distribution, as that will generate the correct code of 4 on the 1099R form.

Submitted by A S on Mon, 2017-11-20 23:32

Thank you! What I’m confused about is, I will need to file a form 5329 for years 2010-2016, right?If I file each of those forms, will I need to state that I had 10% withholding on the lump sum?Or would it be better if I take each distribution out individually as per my rmd calculations for each year, just to have a separate paper and transaction trail for the IRS?

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