RMD in Year Client Dies
My client, Susan, age 81, passes away in late January 2025. She has a traditional IRA with $900,000. One beneficiary, her son, Mike. Her RMD was being distributed monthly in 2025, and the custodian continued the monthly distribution in February, in error, one month after she passed, even after being notified of her passing in January. The February 2025 ACH was received and processed. I’m not so much concerned about the one month, since the IRS received the withholding. Looking to confirm that the son, the sole beneficiary, has till December 31st, 2025, to satisfy the balance of mom’s 2025 RMD and that, as a NEDB, he must start his RMD in 2026 and fully deplete his inherited IRA balance within 10 years. Is that right? Thanks.
Permalink Submitted by Alan - IRA critic on Sat, 2025-04-26 18:56
Yes, that’s correct with respect to the son’s future beneficiary RMDs starting in 2026. Per the Secure Act final Regs, he actually has until the end of 2026 to complete the 2025 year of death RMD and can either do it this year or wait depending on his overall tax situation. If he waits, he will have both year of death RMD income plus his own beneficiary RMD for 2026 included in his taxable income.
However, the post death payment by the custodian will cause an awkward tax reporting situation, as most likely the custodian will issue a 1099R for 2 months of distributions to mother. The second one is legally the property of the son, therefore the nomination process should be used on mother’s final 2025 return to show a negative adjustment of the Feb payment off her return to the son’s return. The son will get his own 1099R for completing the other 10 months of the year of death RMD.
You also mentioned withholding, therefore withholding on 2 months went to mother’s tax account and her final return will show that as a withholding payment for her.
The son should find out now how the custodian plans to report the Feb distribution. While I expect it to be reported to mother, they might instead report it to her estate EIN, in which case the estate would use the nominee process to transfer the taxable income to the son.
Generally, those in failing health should discontinue automatic distributions because if they pass, it almost always results in one or more payments being made post death that are reported on a 1099R to decedent instead of to the beneficiary of the entire value remaining as of the date of death.