Year of Death RMD Question
I’m a fee-only RIA and financial planner in Silicon Valley, and we’re assisting a family in winding up and distributing an IRA that we’ve been managing (successfully!) for 23 years. The IRA is at Charles Schwab. I seem to remember Ed Slott saying to be very careful and take the final RMD *before* distributing to heirs, but Schwab says they can’t do that. Schwab will, however, distribute to the beneficiaries, and they say that then the beneficiaries are allowed to take the final RMD for the original owner from their new inherited IRAs. Schwab says that the IRS considers this equivalent to the final RMD coming out of the original owner’s IRA. Anyone have experience with this type of situation? Thanks in advance! Peter Johnson, http://www.pwjohnson.com.
Permalink Submitted by Alan Spross on Mon, 2012-04-30 19:35
It’s OK as Schwab suggested. Since the decedent’s final year RMD to the extent not taken at the time of death must be paid and reported by the beneficiaries anyway, it does not matter whether this is done before creating separate accounts or afterward.
Since the year of death RMD can be taken by ANY of the beneficiaries in any proportion, Schwab most likely does not want to deal with the accounting issues should the beneficiaries want to split the RMD disproportionately prior to creating the separate accounts. Of course, starting with the year after death the beneficiaries must each take their own correct RMD amount.
Should the year of death RMD not be completed in the same year the owner died, the beneficiaries should file a 5329 requesting the IRS waive the penalty, and the waiver is typically granted.
Permalink Submitted by Peter Johnson on Tue, 2012-05-01 23:21
Thank you, Alan! Just what I needed, and very clearly written. I [i]really[/i] appreciate it!
Peter