IRA Required Minimum Distribution
To enter a Medicaid approved nursing facility in Florida, state law requires the IRA RMD to be paid over to the facility rather than the account holder to pay for the nursing home care. Under Florida law, all or a portion of the IRA balance can be withdrawn prior to the submission of the Medicaid application but, the RMD amount determined as of 12/31/18 will still be required to be paid to the facility. Thus, if a balance of $500,000 was in the IRA at 12/31/18 and the RMD amount is $50,000, the $50,000 would still be paid to the facility even if the entire balance (or a portion thereof) is withdrawn in 2019.
Question: Are there any strategies that can be used to reduce the RMD amount for 2019 now that the 12/31/18 determination date has passed? Is there any possibility of deploying some technique to cause a recalculation of the year-end balance? Any and all ideas are welcomed.
Permalink Submitted by Alan - IRA critic on Tue, 2019-01-08 23:48
There is no way to reduce the RMD for 2019. The 12/31/2018 IRA balance is being reported to the IRS and the IRS knows the person’s age, so they can easily determine the RMD amount. Technically, the first distribution taken in an RMD year is applied to the RMD, so the RMD would likely be satisfied, but the FL law requires the RMD amount to be paid to the facility whether it is the actual RMD or just a distribution done later on. Of course, if a very large distribution is taken it will not change the amount due for 2019 but it will reduce or eliminate RMDs for later years because the 12/31/2019 balance will be very low or 0. If the taxpayer takes a total or very large IRA distribution in 2019, it will spike the marginal tax rate for 2019 and much of the 450,000 remaining outside the IRA will be lost to taxes.