What happens if RMD taken in 2020 when decedent passed 12/31/2019?

Submitted by Mike Leffler on Wed, 2020-04-01 22:33

Question regarding required minimum distribution rules for someone who has passed. Allow me to explain the scenario:

Barbara passed away on 12/31/2019.

Barbara’s daughter, Janet, who is POA on Barbara’s IRA, requests that Barbara’s required minimum distribution for 2020 be processed in January 2020, but did not state that Barbara passed away on 12/31/2019 to the advisor.

Given that Barbara passed away in 2019 and would not have otherwise had a 2020 RMD, who is taxed for the distribution that took place? Barbara’s estate or Barbara’s three children who are each a 1/3 beneficiary of the IRA?

Also, does this impact how future required minimum distributions are calculated for the heirs?

Thank you.



Submitted by Alan - IRA critic on Thu, 2020-04-02 00:27

  • The amount of the distribution should be returned to the custodian along with the death certificate and personal info for each beneficiary and request that the distribution be re done to each beneficiary @ 33.33%. That will conform with 2020 1099R reporting as a death distribution. In the process they can establish individual inherited IRAs on which each check is issued. Since the DOD was in 2019, the Secure Act does not apply and each beneficiary can then stretch their inherited IRA over their own respective life expectancies. While the 2020 RMDs have been waived by the CARES Act, this distribution cannot be rolled over because it is a non spouse beneficiary distribution. 
  • NOTE: If the custodian agrees to accept the return of funds because the distribution was made to a decedent and NOT reissue to the beneficiaries, that would be fine also since the beneficiaries would avoid a 2020 RMD in that case.
  • The decedent’s estate is never involved with this when individual beneficiaries are named. 
  • Sometimes the custodian will not cooperate, will not re issue the distribution, and will issue a 2020 1099R next year. The beneficiaries should plan to report 1/3 of the distribution each on their 2020 returns, but only if they receive their share of the distribution. What happened to the check that was issued? It should NOT have been deposited into the estate account.

Submitted by Mike Leffler on Fri, 2020-04-03 20:00

The check was deposited into the decedent’s personal checking account. The daughter had requested the funds go there.

Submitted by Alan - IRA critic on Fri, 2020-04-03 22:32

The executor might attempt to write a check on the estate account if the custodian indicates they would re issue to the beneficiaries in accord with the iRA agreement. Probably a long shot, but it will save the executor from having to use the nominee process with Form 1041 and issuing a 1099R to the beneficiaries.

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