Can My Sister Take the Inherited IRA RMD For Both of Us?
By Beverly DeVeny and Sarah Brenner
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This week's Slott Report Mailbag answers a popular required minimum distribution (RMDs) question - can my sister take the inherited IRA RMD for both of us? - and another consumer's inquiry on Roth conversion tax reporting. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.
My dad died in February (just shy of age 90) before receiving his RMDs for 2016. My sister and I are the only beneficiaries. She is taking her half lump sum (way more than dad's total RMD). I know that I will need to start taking RMDs on my half (which I'll be rolling into a Survivor's IRA, or possibly a Roth IRA, if that can be done) in 2017.
Question 1: Will my sister taking more than the total RMD cover our obligations, so that I don’t have to take an RMD this year? Nothing I can find explicitly says that I can do that without a 50% penalty hanging over my head. Restated, does the RMD for dad in 2016 need to be split evenly by the beneficiaries, or can it all be taken by one?
Question 2: If I roll my half into a Survivor's IRA, can this be converted into a Roth IRA (Survivor's Rollover Roth)?
Thanks for your help. Two lawyers and one CPA have given me non-helpful answers (i.e., have the companies pay Dad's estate - he had a trust, but the IRAs were not Trust assets).
In theory, your sister’s distribution should satisfy your father’s RMD for 2016. Unofficially, IRS says that the RMD should be apportioned between the beneficiaries named on the beneficiary form.
Your inherited IRA assets can only be transferred to an inherited IRA. They cannot be moved as a 60-day rollover. They also cannot be converted to a Roth IRA. Non-spouse beneficiaries cannot do 60-day rollovers and a Roth conversion is considered a rollover for income tax purposes.
As for the “advice” you have received from two lawyers and one CPA, IRA distributions can only go to named beneficiaries. They cannot be assigned to other beneficiaries or to the estate. The year of death RMD does not go to the decedent or to the estate. It must go to the named beneficiary.
When I make a transfer from a Traditional to Roth IRA, do I need to include a Form 8606 - or does my self-directed IRA custodian do this for me? I am 71 and retired.
The IRA owner must file Form 8606 with their tax return for the year in which they do a Roth conversion. The IRA custodian is only responsible for issuing a 1099-R showing the distribution from the IRA. A custodian has no way of knowing how much you may convert in one year or what your total IRA balances and/or pre-tax amounts might be. And, the signature on the form must be your signature.
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