Amount subject to RMD for inherited IRA

Submitted by Robert Hoffman on Mon, 2020-01-27 20:34

My mother passed away in November, 2019 and left myself and my 2 brothers with 4 retirement accounts, for which we are all equal cobeneficiaries. The titling of these retirement accounts as inherited IRA’s has transpired from December up to the present time, with some custodians doing it literally overnight using electronic communications and others dragging their feet using paper forms and snail mail. At any rate, my question is, who is responsible for determining the correct amount that is subject to the RMD to be taken in 2020 by myself for my inherited IRA? I believe it is supposed to be based on the value of the account on 12/31/19, but how is this determined? If my inherited IRA was titled before 12/31/19, then the custodian would have an accurate idea of the value on 12/31/19. However, if it was titled after 12/31/19, the account would have still been in my mother’s name on 12/31/19 and wouldn’t even have been subdivided among the 3 cobeneficiaries.



Submitted by Alan - IRA critic on Mon, 2020-01-27 21:03

  • Your 2020 beneficiary RMD is based on the balance of the separate inherited IRA accounts that were established by the end of 2019 PLUS 33.33% of the balance of the accounts that were not separated by 12/31/2019. If any accounts were partially separated by the end of the year, the % of the 12/31/2019 balance used would be the fraction remained of the total that is yours. 
  • If your mother did not complete her 2019 year of death RMD, the 3 of you are jointly responsible for completing that RMD. The IRS does not care that you each take out your proportion, but this will also take some coordination. A Form 5329 also needs to be filed for 2019 to request the IRS waive the penalty, which will they automatically do, especially for late year deaths. But the form still needs to be filed unless she completed her 2019 RMD before passing.
  • You also have a decision regarding whether you want to combine your 4 accounts into one. You can combine accounts that your mother owned (did not inherit herself), since the RMD divisors for those accounts will be the same. And if you do NOT wish to combine the 4 or some may not be eligible, if mother owned them all you can take your annual RMD in any combination from the 4 accounts. 
  • If mother had any non deductible contributions (IRA basis) in her IRA, you each inherit your share and would have to file Form 8606 to calcalute the portion of your distributions that are non taxable.


Submitted by Robert Hoffman on Mon, 2020-01-27 23:03

Thanks you so much for your reply. In your experience, can I depend on the custodians of my mother’s retirement accounts to communicate the correct amount upon which to base my beneficiary RMD? 



Submitted by Alan - IRA critic on Tue, 2020-01-28 00:04

Yes, the year end market value of the inherited IRA should be shown in Box 5 of Form 5498. For an IRA that still has multiple beneficiaries, the custodian should figure the amount in Box 5 for each beneficiary. That said, am not sure how reliable they are when there are still multiple beneficiaries at the end of the year. The beneficiary should attempt to make sure they figure out what only their share of the account is so that the RMD is not inflated for each beneficiary.



Submitted by fairira on Tue, 2020-01-28 02:03

To Alan-iracritic, I think you probably intended to say “one third or 33.33% ” instead of “25%” in your Mon., 2020-01-27 13:03 post that began “Your 2020 beneficiary RMD is based on the balance of the separate inherited IRA accounts that were established by the end of 2019 PLUS 25% of the balance . . . ”  If this minor change is correct, in no way does it lessen my profound respect for and admiration of you and your vast knowledge and your selfless contribution of help to so many. I



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