Solo 401(k) beneficiary RMD
Client died in 2018 at age 60. She named her brothers as beneficiaries on all her retirement plans. She had IRA’s and a Solo 401(k) plan. The IRA’s were directed to Inherited IRA’s for her brothers. Can the money from the Solo 401(k) be directed to the same Inherited IRA’s already funded or must it be kept seperate? Also, what are the RMD rules for the beneficiaries of each?
Thank you!
Permalink Submitted by Alan - IRA critic on Tue, 2019-01-29 00:16
The solo K plan must be terminated due to the client’s death, probably by a direct rollover to inherited IRAs, which can be the same inherited IRAs already created. Starting this year, beneficiary RMDs for each of the inherited IRAs will be based on the single life table for the age each beneficiary will be on 12/31/2019. The account value for the RMD calculation will be each beneficiary’s share of the 12/31/2018 balance of the solo K and IRAs. Note that because the solo K has not yet been rolled over, each brother has the option of a direct rollover to an inherited Roth IRA (would be taxable) as well as an inherited TIRA. Also, each brother can elect the 5 year rule if they wish, but that is seldom a good choice. Under the 5 year rule, there is no annual RMD but the entire inherited IRA must be drained by 12/31/2023.