Allocation of RMD
Question: An individual passes away in 2021 prior to taking her required minimum distribution. The deceased named 3 adult children beneficiaries in equal percentages. The deceased’s RMD must be taken by 12/31/21, however, must that amount be allocated equally among the three beneficiaries or may the three beneficiaries decide amongst themselves how to allocate the RMD? In other words, could the RMD be allocated entirely to that beneficiary with the lowest marginal tax rate among the three named beneficiaries?
Permalink Submitted by Alan - IRA critic on Tue, 2021-09-14 23:31
Yes, the year of death RMD can be taken in any combination of the beneficiaries per the IRS Regs. Usually, this is done because one beneficiary or perhaps two need the money right away while others do not, not because someone’s tax rate is lower. The others with higher tax rates still have their full 1/3 shares to distribute over 10 or 11 tax years under the 10 year rule. Of course, when the year of death RMD is completed other than a pro rated manner, it takes coordination and communication between the beneficiaries, and the hope that the beneficiary taking the distribution will follow through and actually do it.