I have a client who passed away and has not taken any of his RMD for the year from his Traditional IRA. There are 4 beneficiaries (his children), 1 of which will be taking a full distribution of their portion which will more than cover the decedent’s RMD for 2021. Are the remaining 3 still required to take their respective portion of the RMD or does the distribution of the one sibling take care of it for the rest?
And if the full deceased’s RMD didn’t take place, who pays the penalty? Can’t be the Estate, right, because the IRA Custodian won’t even disclose such details to the Executor. In my case, one beneficiary took more than their required part of the RMD but another didn’t even accept their IRA till late the following year and other beneficiaries took at least their RMD portion as calculated by the IRA Custodian and possibly some additional, so the deceased’s RMD may or may not have been met. A rough calculation from the details disclosed suggest the deceased’s RMD was met in this case, but neither the IRA custodian nor the full set of IRA beneficiaries (10 of them) wishes to be forthcoming.
Anecdotal indications indicate that the IRS is not any better at enforcing year of death RMDs than they are beneficiary RMDs. Most likely, there is no consistency to IRS actions in this situation even if they determined that the total year of death RMD was not taken. I have also heard that to be safe you should at least take out your own share of the year of death RMD and you will be free of any penalty even if the others fail to take out their share. The resulting conclusion is that if you are confident the others will do as they promise, you should not feel that you must take out your share. If you are not confident, then best to take out your share.
Thank you. After much gnashing of teeth and attempts at lining up ducks I came to exactly that conclusion, as there appeared to be no other.
Permalink Submitted by Alan - IRA critic on Thu, 2021-03-25 16:01
The distribution satisfies the year of death RMD obligation for all beneficiaries. The IRS Regs indicate only that the RMD amount “must be distributed to a beneficiary”, which is construed to mean any beneficiary. However, communication is still needed to be confident that the required distribution actually took place.