RMD after death
Is it appropriate to make a normal RMD that is due for the same year immediately following the death of the account holder ?
- The beneficiary has no choice. The custodian will not make a distribution to a known decedent, and also will not make a distribution to a beneficiary before the beneficiary goes through the retitling process. Noted IRA expert Natalie Choate describes this a copied below:
- “The IRA provider’s usual position is that it can accept instructions (including withdrawal requests) only from a customer (account holder) of the firm, and that until the beneficiary has signed the appropriate documents the beneficiary is not a recognized account owner and customer of the IRA provider company. Furthermore, that signature typically has to be on a brand new account the IRA provider opens to succeed to the existing (deceased participant’s) IRA. The way the Code and regulations discuss the inheritance of IRAs gives the impression that the beneficiary inherits exactly the same account that the deceased participant used to own, just as the beneficiary might inherit a house or a chair that the decedent used to own. It’s the same house or the same chair with a new owner. But financial institutions can’t cross out the decedent’s name 16 on an account agreement and write in the beneficiary’s name. They can’t put a new name and Social Security number on an existing account. They need a new signature card, new address, new everything. A new owner (the beneficiary of the old owner) must have a new account.”
- If you are concerned about the year of death RMD being late, the new proposed Secure Act Regs include a provision that the year of death RMD can be distributed up to the filing due date plus extensions without incurring any penalty. Therefore, there is more time after the end of the year to complete the year of death RMD.
Thanks so much Alan! The last line is the most critical for us in this situation. I really appreciate the detail as to how the custodian views their role in the process and how this affects ours on behalf of our clients the spousal beneficiay.
Permalink Submitted by Alan - IRA critic on Wed, 2022-11-09 18:49
Yes, after death of the IRA owner, the account must be properly retitled in the name of the beneficiary. A death certificate and beneficiary information must be supplied for titling the inherited account. Usually, the custodian will then transfer the balance to a new inherited IRA linked to beneficiary’s TIN or SSN, and the beneficiary can then request a distribution including the uncompleted RMD of the owner. A 1099R will then be issued the following January to the beneficiary that received the distribution.
Permalink Submitted by David MAURICE on Wed, 2022-11-09 19:04
I should have been more specific as this answer describes the process we are just beginning. My question is really whether it’s appropriate BEFORE the death certificates are available and the process becomes formal, to go ahead with the end-of-year planned distribution or, if it’s better to wait until the formal process of issuing the new account to his spousal beneficiary. In this case, it would be helpful but not necessary to go ahead with the distribtuion but certainly not if this is prohibited or restricted by rules.