RMD Question

Submitted by michael steinebach on Mon, 2019-12-02 18:01

Jon, one additional fact – my sister passed four months after my Mom passed – Mom died in March and sister in July – Mom had already taken her RMD in the year she passed (we withdrew the monies in January) – so my sister never took a distribution – the first time we would have done that was the following January – Morgan Stanley (albeit not tax advisors) suggested that since there was no distribution it believed that the kids could be deemed the beneficiary and not the successor – let me know – no rush – John

Mother with IRA passed away in March 2019. Mother is over 70 1/2 and took RMD in 2019. Beneficiary is the daughter. Daughter passes away is July 2019. Daughter never took distribution. Now the accounts are going to the Daughters children.

Question: are the children deemed beneficiaries in the eyes of the IRS (because there was no distribution from the daughter? Or are the children deemed successor beneficiaries in the eyes of the IRS. I’m looking at Inherited IRA rules and if the kids would be considered successor beneficiaries inheriting the inherited IRA or if the kids could be treated as beneficiaries because no RMD was taken from the daughter in 2019. Help?



Submitted by Alan - IRA critic on Mon, 2019-12-02 18:31

  • Your sister is the beneficiary for RMD purposes unless her executor DISCLAIMS the IRA and you did not mention a disclaimer being filed. In any event, a disclaimer deadline is 9 months from the date of death, so the deadline would be very soon.
  •  Your post suggests that your sister named her children as successor beneficiaries before she passed. If she did not, then the IRA would go to sister’s estate. Whether your sister took a distribution or not does not affect where the IRA goes in this case.
  • Therefore, If she named her children as her beneficiaries before passing, the children will inherit the IRA as successor beneficiaries. Their first beneficiary RMD is not due until 2020, and can be taken as late as 12/31/2020. They cannot use their own life expectancies, but must use the divisors that their mother would have used had she lived. The initial divisor for their 2020 beneficiary RMD would be the Table I divisor for the age mother would have reached in 2020, then that divisor will be reduced by 1.0 for each year after 2020. 
  • If your sister passed without naming her own beneficiaries, her estate would probably have inherited the IRA, or the IRA agreement might have specified her children. Please clarify whether your sister specifically named her children as her beneficiaries, or if her estate inherited and her children are receiving the IRA under your sister’s will.

Submitted by David Mertz on Mon, 2019-12-02 19:42

  • To be clear, the deadline for your sister’s executor to disclaim on behalf of you sister is 9 months from the date of your mother’s death.
  • Would sister naming the successor beneficiaries constitute taking possession of the IRA which would preclude sister disclaiming?

Submitted by Bruce Steiner on Sat, 2019-12-14 22:02

  • Bruce Steiner

Submitted by David Mertz on Sun, 2019-12-15 03:00

Interesting.  After asking the question I turned to Natalie Choate’s book where she says that a beneficiary designating a successor beneficiary “is probably not ‘acceptance,’ unless the beneficiary dies while that designation is in effect” (i.e., before disclaiming).  It appears that 121 T.C. 54 (2000) is a case where the beneficiary died while the designation was in effect. That seems to parallel the circumstances of sister above and a disclaimer executed by sister’s executor probably would not be a qualified disclaimer.

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