Year of Death or Year Following Death Divisor
If Traditional IRA owner dies in 2014 and would have been 90 on her birthday in 2014 (year of Death),when Designated Non spouse Beneficiary who’s older than IRA Owner takes her RMD from this account for 2015, is Beneficiary using the divisor (from Single Life Table) for the age the owner would have been on her birthday (91) in 2015 (year following her death) ? Thanks again..
Permalink Submitted by Alan - IRA critic on Sat, 2016-11-12 02:22
Yes, if the non spouse beneficiary is older than the decedent, the RMD is based on the decedent’s life expectancy, but if they were only one year apart, check the single life table to determine the highest divisor (lowest RMD). For example, using the decedent’s age, the divisor for 2015 would be 4.5, then reduced by 1.0 for each year thereafter. SInce the divisor is based on the owner’s age, you enter the table at age 90 for the year of death (5.5 divisor) then reduce it to 4.5 for 2015. The divisor using the beneficiary age is determined by the age in the YEAR AFTER death (2015), so if the beneficiary would have reached 92 in 2015, the divisor is 4.9 for 2015. So if the beneficiary is only 1 year older than the decedent, the beneficiary’s age will produce the lower RMD in 2015 and beyond. If beneficiary was 2 or more years older than decedent, then the decedent’s life expectancy will produce the lowest RMD (highest divisor). This complexity is caused by the extra year of 1.0 reduction when the decedent’s age is used.
Permalink Submitted by Cheryl Van Beek on Sun, 2016-11-13 18:29
Thank you very much.