RMD in the year of death by non-spouse beneficiaries

Submitted by Mark Pittleman on Mon, 2017-11-27 18:39

An IRA owner died at age 95. His 3 children are the beneficiaries. No RMD has been withdrawn so far in the year of death.

It is my understanding that the beneficiaries should take out the RMD in the year of death to avoid the 50% penalty. The question is: do the 3 beneficiaries have to each take a portion of the RMD in the year of death or could 1 of the beneficiaries take the full RMD to satisfy the RMD requirement in the year of death and avoid the 50% penalty?



Submitted by Alan - IRA critic on Mon, 2017-11-27 23:10

The year of death RMD is a joint responsibility when the owner did not complete it. Therefore, one beneficiary could take out the total remaining RMD amount and the others would not have to withdraw anything until the following year. Also, while completing the year of death RMD is preferable before year end, the IRS is aware of many complications in completing it in time and will therefore almost always grant the penalty waiver as long as the RMD is completed later and a 5329 is filed to request the penalty waiver.

Submitted by Mark Pittleman on Mon, 2017-11-27 23:43

Thanks much for the comments.  If you have any authority or articles that I could keep in my file to support the “one beneficary withdrawal position” that would be great.   I think it is prudent to have some support when dealing with a potential 50% penalty. Thanks again.

Submitted by Alan - IRA critic on Tue, 2017-11-28 03:10

Natalie Choate and other renowned retirement plan experts agree that the year of death RMD can be made to ANY beneficiary if the owner did not complete the RMD. This is the RMD of the decedent, not that of any particular beneficiary. This conclusion is derived from IRS Reg 1.401(a)(9)-(5) Q 4 where it states that the year of death RMD must be distributed to “a beneficiary”. There is no mention of particular beneficiaries or ratable distributions. The distribution must be made after a beneficiary has submitted documentation and for almost all IRA custodians a separate inherited IRA will have to be established before a distribution is made. Quite often when there are multiple beneficiaries, at least one of them will want to take a distribution much larger than their share of the RMD, and that let’s the others off the hook until the actual beneficiary RMDs begin.

Submitted by Raymond Keefe on Sat, 2017-12-02 12:54

Decendent had not taken his RMD from any of his IRA’s. The beneficiary of one of his IRA’s is his estate. Does the distribution of the entire IRA to his Estate before year end go toward satisfying the decendent RMD requirement?I think the answer is “yes” but I’m not sure. In addition, the year end for the Fiduciary Return may not be 12-31. 

Submitted by Alan - IRA critic on Sat, 2017-12-02 17:02

The estate can satisfy the year of death RMD just like any beneficiary, but if the estate IRA is sizeable it might be better for the executor to assign it to the estate beneficiaries to avoid taxation of a lump sum distribution. The IRS Reg indicates that a beneficiary must complete the decedent’s year of death RMD, but it is silent on when taxes are due, so I doubt that if the estate takes a lump sum and files with a fiscal year end there would be a problem over the estate beneficairies paying taxes on the RMD a year later than usual.

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