Taking the deceased’s final RMD
Let’s say the owner of a Traditional IRA passes away on January 20th.
The non-spouse beneficiary has until December 31st of the year of death to take the deceased’s final RMD.
Does it make any difference whether the beneficiary takes that final RMD in March or December? Anything to know or keep in mind?
Thanks for your time.
Permalink Submitted by Alan - IRA critic on Sun, 2021-04-18 00:29
Makes no difference. The year of death RMD should be completed by the end of the death year, but often an IRA owner passes late in the year leaving no time to complete the year of death RMD. In that case, the beneficiary can complete it the following year, but should file a 5329 for the year of death requesting the penalty be waived. The IRS routinely grants the waiver. It is also OK if the beneficiary does a direct transfer of the inherited IRA to another custodian, and completes the year of death RMD from the new custodian.
Permalink Submitted by Nathan Kastner on Mon, 2021-04-19 22:27
Alan, you sure about that last sentence? The IRS specifically states that required minimum distributions are NOT eligible for rollover. There was an exception in 2020 because the COVID waiver of RMDs was passed after some people already took their distributions for the year. But, as a general rule, you have to take the RMD and then rollover the remainder.
Permalink Submitted by Alan - IRA critic on Mon, 2021-04-19 23:19
A direct transfer is not a distribution and therefore not an RMD. An actual distribution from a non spouse inherited IRA is not rollover eligible. That is why an inherited IRA can only be moved by a direct non reportable trustee transfer, and these are totally disregarded with respect to RMDs.