How do you know if inherited IRA with multiple beneficiaries was split by Dec 31st?

Submitted by Laura Coen on Mon, 2019-12-30 17:42

I understand the rules for an inherited IRA with multiple beneficiaries that says the life expectancy of the oldest beneficiary is used for calculating the RMD unless the beneficiaries split the IRA into separate accounts by December 31st after the account holders death. My question is how will an advisor/CPA such as myself know if my client’s inherited IRA was split by this deadline to know the correct life expectancy to use for the RMD calculation? If a client comes to me years after an IRA was inherited and I was not involved or knowledgeable about when the account was split do I take their word it was split timely or is there some kind of proof that can be provided?



Submitted by Alan - IRA critic on Mon, 2019-12-30 18:52

  • From a practical standpoint I would take their word for it. I think you meant to state the deadline as “12/31 of the year after the year of the account owner’s death”, so that gives them at least 12 months to act. In addition, if they have a beneficiary coded 1099R for the year of death or the following year, they met the deadline because almost all IRA custodians will only make a distribution after a separate account is established because they do not want to handle separate accounting on the same account, with multiple SSNs etc. One situation that probably indicates missing the deadline is when they are not notified of the account in the first 2 years after death. A beneficiary 5498 will probably not be indicative other than to show the death has been reported, but the 5498 will only show the share of the account applicable to the beneficiary.
  • I would be more concerned if a non individual beneficiary was involved such as an inherited IRA assigned out of the estate, as that would indicate a major reduction in the stretch or the 5 year rule. In other words, some situations that have the largest impact are the easiest whereas determining when multiple individual beneficiaries were born isn’t practical.
  • You should also not be concerned if ALL beneficiaries have established separate accounts, as long as your client has done it or says them have, which is sufficient despite some vague IRA verbiage.
  • Come 2021, you will have enough work to do since all beneficiary RMD divisors will have to be reset due to the expected approval of the new mortality tables effective 2021. 
  • I don’t see any chance for better IRS/custodian inherited RMD oversight than we have had, which is very little. If anything, the IRS would do less now that the 10 year rule is going in, and that is also going to apply to successor beneficiaries who inherit an already inherited IRA after 2019.
  • I would guess few advisors are devoting much time to this, so I would simply be aware of obvious clues that show up in your usual info gathering process. In other words, make a reasonable effort but don’t devote too much time to this.

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