Final distribution from inherited IRA
For an inherited IRA, you use your life expectancy as the divisor in the first year, and subtract 1 for each subsequent year. This means that in the last year of the IRA, your RMD will be 100% of the balance at the end of the previous year.
But if you’ve invested this money in securities that drop below the RMD amount, it becomes impossible to satisfy the “required minimum.” Do you just withdraw everything? Presumably the trustee will check “Total Distribution” in Box 2b. Is any additional documentation necessary?
(This is unlikely with a Traditional IRA as the uniform life expectancy is more than two years through age 114.)
Thank you.
Permalink Submitted by Alan - IRA critic on Sat, 2021-02-20 01:52
There is no problem with the distribution being less than the RMD as long as the IRA is drained. And the last year cannot always be predicted if the divisor drops to just below 1.0. A gain in the IRA before the RMD is taken could leave a balance in the account for one more year.