To whose RMD does post-owner-death pre-spousal rollover IRA distribution apply?

Submitted by Walter Laub on Wed, 2022-12-21 18:34

Hi all,

This might be an easy one:

We have a new client, widow in her 80s. Her husband passed in Feb 2022 and the accounts are coming to us now in late 2022 so there isn’t a lot of clarity as far as account activity earlier in 2022. The bulk of the IRA assets belonged to the deceased husband and were transferred to the wife via a spousal rollover.

Sufficient IRA distributions were made to satisfy the husband’s 2022 year-of-death RMD, but I am unsure if the wife’s RMD has been met.

My question is this: if IRA distributions were made from the husband’s IRA after his death but prior to the account being rolled over/retitled to the wife, would these distributions satisfy the wife’s RMD?

My thought is that distributions reported on the 1099-R would continue to be reported on the husband’s side until the rollover takes place which would then report subsequent distributions on the wife’s 1099-R but I am not positive. Or could the date of death certificate be used to argue the RMD was satisfied?

Many thanks,

dub



Submitted by Alan - IRA critic on Wed, 2022-12-21 19:10

  • I agree with your impression regarding the 1099R forms.
  • I assume that these post death distributions resulted from a periodic automatic distribution plan, but delay in submitting the death certificate and beneficiary data allowed these to continue for several months. The IRA custodian is very likely to include all those distributions on decedent’s 1099R as you indicated. If the spouse is beneficiary under his will as well as his IRA beneficiary, at least there will not be issues in reallocating these distributions to the entitled party.
  • The IRS does not care if the year of death RMD is completed by the decedent or the beneficiary. 
  • Did spouse have her own IRA before husband’s death, and then rolled the inherited IRA into that IRA or another IRA? If so, and husband’s 1099R falls short of his RMD, then her 1099R will have to make up that shortfall plus her own RMD.  
  • Proposed IRS Secure Act regs allow until the tax due date with extensions to complete the year of death RMD without having to file a 5329. However, she might want to complete all RMDs this year if possible since this is the last joint return year, and her marginal rate will rise in 2023. It may also be beneficial if the RMDs were exceeded this year or if a modest conversion is done to take advantage of the joint marginal rate.

Submitted by Walter Laub on Wed, 2022-12-21 20:22

Thanks for your reply – see responses below: 

  • per bullet #2 – the IRA distribution amounts are all quite different like someone went in and requested the distributions (probably online I am guessing).  I imagine the custodian would not distribute the money before retitling the account if they had been informed of the account owner death, but I can see how in the grief following the passing of the owner how the spouse or another family member just requested the funds without filing the death with the custodian.
  • per bullet #3 – correct, we should be good there.  Whether the distributions end up being in the name of the account owner or the widowed spouse, the owner’s year-of-death RMD should be satisfied.
  • per bullet #4 – she did have her own IRA, which is the RMD I am looking to ascertain whether any of these post-death distributions from the husband’s IRA can satisfy hers.  His RMD should be good.
  • per bullet #5 – thanks!  We are looking into that as well – joint vs single opportunities.

Submitted by Alan - IRA critic on Wed, 2022-12-21 21:12

The only distributions that could be used to satisfy her own RMD would be those from her own IRA, either after or before the spousal rollover. Has she defaulted to ownership of the inherited IRA then distributions from an inherited IRA could be used to satisfy her own RMD, but the earliest default ownership could occur would be 12/31/2023. Therefore, she must still complete her own RMD and distributions from his IRA that exceeded his RMD could not be credited to her RMD.

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