rmd after date of death
Client died in January 2021, before his RMD was distributed for 2021. Scheduled distribution date for the RMD is in May. Minimal personal income had been received so far in 2021. He will have substantial taxable income inside his estate, as he had savings bonds and a fairly sizable IRA with his estate as beneficiary. Kids are all in higher tax brackets than dad was. Who will the RMD be taxed to? Or a better question, can it be still be taxed to dad personally?
Permalink Submitted by Alan - IRA critic on Wed, 2021-04-21 16:31
Distributions from the account will be reported to the recipient, and cannot be reported to the decedent on a 1099R. In the case of an estate beneficiary, distributions made to the estate will be reported to the estate EIN and generally would be passed through the estate to the estate beneficiaries and taxed at their personal tax rates. However, if the inherited IRA can be assigned out of the estate by the executor to the estate beneficiaries, these beneficiaries can complete the year of death RMD and avoid a distribution to the estate. The year of death RMD can be satisfied in any combination by the estate beneficiaries.
Estate executor should advise the custodian not to make the May distribution ASAP unless they want to receive the distribution in May. The year of death RMD is not due until year end, and if would be advisable to delay it in case executor can assign the IRA to the estate beneficiaries before year end.
Regardless of the general advice not to allow retirement accounts to be inherited by the estate, people keep doing this. For deaths prior to the RBD, this will result in the 5 year rule applying.