Year of Death Missed RMD Question
Hello,
I am working with a client how is the beneficiary of there father’s account held at another custodian. The father was taking his RMD via monthly payments. The father passed in July 2021 but the payments kept running until the account was restricted and the November payment was processed. The father still had a RMD payment of $1500 that was due in December 2021.
There are 4 beneficiaries (25% each) who will be accepting the funds and I am working with 2 of them and setting IRA BDA’s for them at my custodian. For the missed 2021 RMD amount of $1500, wouldn’t one of the 4 beneficiaries need to satisfy the missed RMD and then they could take their 25% portion of the account and the distributions would follow the 10 year rule per the Secure Act?
The reason that I am asking is because the custodian where the father’s account is being held at is saying that the missed 2021 RMD does not need to be satisficed by the beneficiaries. Which I do not agree with. Any feedback will be greatly appreciated.
Thank you,
Permalink Submitted by Alan - IRA critic on Fri, 2022-03-11 19:27
You are correct that the remainder of the 2021 year of death RMD must be taken, and can be satisfied by any combination of the beneficiaries after establishing their own inherited IRAs. Usually, there will be one beneficiary who wants to take a distribution, and if that’s the case the others will not need to participate.
There’s another issue here. Those monthly distribution after the DOD belong to the beneficiaries, not to deceden’t estate and should not be reported on either the decedent’s final return or the estate return. They should be transferred and taxed to the beneficiaries, but the IRA custodian is not likely to re issue the 1099R, and therefore the nominee process would have to be used to move the income to the correct return. This issue would probably not be detected by the IRS, but if the will has different beneficiaries than the IRA, the funds end up in the wrong pot.