RMD after death

Submitted by Robert Hoffman on Mon, 2019-12-09 22:11

My mother’s IRA RMD was prescheduled to occur in early December (direct transfer to her checking account). She died just a few days before the transfer so it went through before the custodian could be notified, presumably using her own TIN. A 10% payment was also made to the IRS. My understanding is that her final RMD, if it has not occurred by the time of death, is supposed to be made to the beneficiary (myself in this case, non-spouse) and is taxable to the beneficiary. My question is whether or not the custodian can essentially “undo” this transaction and start all over again.



Submitted by Alan - IRA critic on Mon, 2019-12-09 23:48

  • Sorry to hear of your loss. These automatic RMD arrangements are prone to create administrative hassles, made worse by withholding. If it were not for the withholding I would return the check ASAP as her beneficiary (and executor?)  and ask that it be re deposited to the IRA. Then have the IRA re titled and have the remainder of the 2019 RMD paid to you as beneficiary.
  • But the withholding creates another an additional hassle. It’s already in the IRS for your mother’s account and cannot be returned. Therefore, if you are the beneficiary of her estate and the IRA as well, I would leave everything as is and report the distribution on her final return. 
  • After the 1099R is issued next month, then submit the death Certificate and have the IRA Retitled with you as beneficiary. If the custodian notices that the DOD is prior to the last RMD distribution at that time they are less likely to want to re issue it for that last distribution  to you, or to the estate which would be incorrect because the estate is not involved in distributions after her death.  Of course if this IRA is so large that you want to name your own successor beneficiary on it sooner rather than 7 weeks from now, you will have to have the IRA retitled ASAP and hope the custodian will report all 2019 distributions to your mother. 
  • Or perhaps the custodian has formal procedures to deal with this since this probably occurs a few times a year with them. If they are locked into a procedure, they might not allow exceptions once they find out about her death. Or they might listen to you if you are sole beneficiary and executor.

 

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