Year of Death RMD

Submitted by Brandon Blanchard on Wed, 2023-06-21 18:15

Hi,

My client, lets call her Sue, died in January this year at age 85. The RMD on her IRA was $15,000 and she had yet to take her RMD prior to passing. Her IRA has now been divided into 3 separate beneficiary IRAs for each of her 3 children. I know the IRS wants the $15,000 (Sue’s RMD) still distributed by year-end. My understanding is that as long as $15,000 aggregately is distributed out of the 3 beneficiary IRAs, that meets IRAs rules. Is that correct? So either of the following examples would suffice to meet Sue’s RMD.

1. Each child distributes $5,000 out of their inherited IRA by 12/31/2023 (3 x $5,000=$15,000)
2. One child (who is probably cashing out the inherited IRA to buy a property) takes at least $15,000 out of their account thus his other 2 siblings don’t need to take any RMD from their inherited IRA by 12/31/2023



Submitted by Alan - IRA critic on Wed, 2023-06-21 18:29

That is correct. Any combination adding up to 15k will satisfy the year of death RMD. In scenario 2, the others need to get confirmation from the distributing child that they actually took that distribution. 

Submitted by David Rohde on Wed, 2024-02-28 16:01

I have a similiar situation and Found some other publications indicating that each Beneficiary must take out their equal prorportion. Is there any specific guidance from the IRS that speaks to this clearly? Below is from AscensusYear of DeathIf an IRA owner dies before satisfying his RMD for the year, the beneficiary must take the remaining RMD amount by December 31 in the year of death. If there are multiple beneficiaries, then each beneficiary must take their portion of the RMD: one beneficiary cannot satisfy the entire RMD amount or the shortfall of another beneficiary.

Submitted by Alan - IRA critic on Wed, 2024-02-28 16:13

Surprising that Ascensus would state this, as it is contrary to the interpretation of the IRS and most all consulting firms. Following is copied from IRS Reg 1.401(a)(9)-5 QA #4, and note that it states “a beneficiary” must complete the year of death RMD, meaning any beneficiary.
“Thus, a minimum required distribution, determined as if the employee had lived throughout that year, is required for the year of the employee’s death and that amount must be distributed to a beneficiary to the extent it has not already been distributed to the employee.”
The IRS has not penalized any beneficiary that withdraws at least their share of the RMD, even if others fail to participate, so if beneficiaries do not communicate with each other and it is not clear whether some other beneficiary completed the entire year of death RMD as often happens, that beneficiary might take out their proportion to be safe from any penalty.

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