Missed 2023 RMD
We have a new client who is 47 years old. Her mother passed away in 2022 and an inherited IRA was established. It doesn’t appear that an RMD was made in 2023. We were going to transfer the account from Vanguard to our custodian, but want to clear everything up before the transfer. What is the best way to remedy this situation?
Permalink Submitted by Alan - IRA critic on Tue, 2024-09-17 15:10
Did mother pass prior to RBD or after? If after, did mother complete her 2022 RMD before passing? And was client the sole beneficiary of the IRA, and if not the sole beneficiary was the separate inherited IRA established before 2024?
Permalink Submitted by Tracy Hawbaker on Tue, 2024-09-17 16:37
Her mother was 77 when she passed away. I do not know if she had completed her 2022 RMD. I believe the inherited IRA was established in 2023.
Permalink Submitted by Alan - IRA critic on Tue, 2024-09-17 18:52
OK, since mother passed after her RBD, client must take annual RMDs in years 1-9 of the 10 year rule, but the IRS has waived the 2023 and 2024 beneficiary RMDs for 10 year rule beneficiaries. But they have not waived the year of death RMD if mother did not complete it, and if she did not, that RMD is late. Client should determine if mother completed that RMD and if not should complete it and file Form 5329 to request that the penalty be waived for reasonable cause (being RMD confusion if no better reason). Beneficiary RMDs must resume in 2025 based on client’s age in 2023 (2023 divisor less 2.0).
Note that the year of death RMD can be done either before or after the transfer to a new custodian.
Permalink Submitted by Tracy Hawbaker on Wed, 2024-09-18 10:57
If the 2023 and 2024 beneficiary RMDs have been waived, does she have 8 (2025 – 2032) or 10 years (2025 – 2034) to deplete the account? I understand that she will have to begin taking RMDs in 2025.
Permalink Submitted by Alan - IRA critic on Wed, 2024-09-18 11:16
8 years, so the inherited IRA must be drained by the end of 2032. The divisors are the same as if she did have to take 2023 and 2024 RMDs, so her initial divisor based on her age in 2023 would be reduced by 2.0 to determine the 2025 divisor.