Death and the Still Working Exception
Can someone please give me the rules under the following scenario?
My client, age 75, was still working at his company and thus, deferring his RMDs from his 401k plan under the still working exception. In May of this year, he passed away. His 401K is worth a little over $1,000,000. His spouse and sole primary beneficiary has made a direct transfer of his 401K over to her indivual IRA.
Can someone explain what the RMD rules are? Was his RMD supposed to have happened before the beneficiary transferred the proceeds directly to her IRA? If so, can that be remedied? If, because of his death, there was no RMD necessary, does the beneficiary (his spouse) have to take an RMD based on this amount?
His spouse is age 72 and is currently taking her RMDs from her IRA.
I could really use some help here.
Thank you in advance.
Permalink Submitted by Alan - IRA critic on Thu, 2019-08-22 20:24
Because he passed prior to his RBD, there is no RMD due for 2019 and the entire balance can be rolled over to the surviving spouse’s IRA. She will also not have an RMD due for 2019 on this amount, but her IRA balance will be higher on 12/31/2019 and therefore her 2020 IRA RMD will be higher.
Permalink Submitted by David Grand on Thu, 2019-08-22 21:19
Alan-iracritic,Thank you for the information. You said he passed prior to his RBD….can you tell me what the the RBD is (or would have been)?
Permalink Submitted by Alan - IRA critic on Thu, 2019-08-22 21:38
RBD = required beginning date. His RBD would have been 4/1 of the year after he retired, but since he was still working under the exception, his RBD is not even known. If he had retired this year before passing, his RBD would have been 4/1/2020 and he still would have passed prior to his RBD.