RMDs

Submitted by Kris Loree on Mon, 2019-12-02 19:09

My 84 year old dad passed away in March 2019. He did not take his RMD for 2019, and his son and daughter are the beneficiaries 50% each. I (son) have claimed my 50% and have taken a RMD. The daughter(my sister) has not claimed her half of dad’s IRA. (She has the paperwork to do so, but has not yet submitted the paperwork). So there is still 50% left in my dad’s IRA. If his daughter does not claim her 50% this year, is my deceased dad’s IRA still responsible for a 2019 RMD? What if the daughter does not claim her 50% this year and therefore does not take an RMD, is she required to take two in 2020? If she does not claim her 50% by the end of March 2020 then she would be required to take out all of her share within 5 years, correct?



Submitted by Alan - IRA critic on Mon, 2019-12-02 19:31

  • Beneficiaries are jointly responsible for completing the year of death RMD. If your distribution was large enough to cover the remaining portion of your Dad’s 2019 RMD, that will satisfy the entire obligation. If your distribution was only your share of the RMD, then the IRS has not been penalizing beneficiaries for more than their own share of the year of death RMD. They might levy the penalty on your sister for her own share however.
  • The 5 year rule does not apply for deaths after the required beginning date. Therefore, if your sister is late she can make up the late RMDs and file a 5329 for each year requesting the penalty waiver, but to request the waiver she must make up all the missed RMDs including her share of the year of death RMD unless your distribution was large enough to cover the total 2019 RMD.
  • Typically, the more beneficiaries named on a retirement account, the more likely there will be one or more beneficiaries who procrastinate. They are setting themselves up for a possible penalty or filing multiple 5329 forms to request waivers, and also to make up the late RMDs in order to request the penalty waivers, they will be taxed on multiple late RMDs in the year they were eventually distributed. Another consequence is that by not claiming the account, she cannot name her own beneficiary for her share and if she were to pass then her share would go to her estate subject to probate.
  • However, there should be no consequences to you for her delays. Normally, you would now have your own separate inherited IRA with future RMDs based on your single life expectancy. You would use Table I and your age in 2020 to get the 2020 divisor, then reduce that divisor by 1.0 for each successive year.
  • Remember to check to see if your Dad had basis from non deductible contributions in his IRA. If so, you each inherit 50% of that basis and would file an 8606 to report distributions from your inherited IRA. A portion of your distributions would be non taxable if you inherited IRA basis.

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