RMD after death (non spouse)

[Gretel]

OK, searched posts, TTB and Pub. 590 but did not find anything in regards to RMD in year of death. Neither decedent nor beneficiary have taken RMD for last year even though RMD is required.

Will both, decedent and beneficiary need to get RMD or only one of them? If so, do they have a choice? Well, of course 2011 is done and over with but someone needs to pay the penalty. If paid by decedent, I guess situation is remedied with her death and beni needs to get RMD for 2012.

[Burke]

RMD should have been paid either to decedent (before his death) or to the bene (after death) but before the end of the year 2011. If RMD was not taken prior to the date of death, then you cannot put it on the decedent's final tax return now, nor is the decedent liable for the penalty. The bene is. You can probably get out of the penalty however. The custodian messed up on this one.

[Gretel]

Thanks, Burke, that was clear and precise. I will attach statement for penalty abatement.

[Roland Slugg]

I agree with the above post except the statement that "the custodian messed up." The custodian only "messed up" if he had been given standing instructions, or instructions specifically for the year of death, to make a distribution and failed to do so. Custodians do not make distributions, including RMDs, unless requested to do so.

I have never seen ... in the Code, Regs, Pub 590 or other, non-IRS literature, any explicit rules addressing the scenario you have, and I believe the IRS should cover this in Pub 590, as it is a fairly common situation. In several reference sources, however, it does say that a non-spouse bene must start receiving distributions NLT December 31st of the year after the year of death. This suggests to me that no RMD is required in the year of death (unless death occurred right on December 31st). Since a decedent isn't required to take his RMD before December 31st, and a bene isn't required to take distributions until December of the following year, it would seem to follow that the year of death itself could "drop through the crack" as far as an RMD is concerned.

[Gretel]

Roland, are you sure that the beni can wait until the year after death even in the scenario that decedent had not taken RMD yet? One would think that it is either or with no year skipped in between.

On the other hand, if there are no clear guidelines, how does the IRS want to know what is right?

[Gretel]

Flow chart

I can't believe this. Did another internet search and, voila, yesterday someone posted this. While this is not strictly tax bases, the flow chart shows all the options (or so it seems). You have to click somewhere to get to the full flow chart.

http://www.marketwatch.com/story/avoid-these-common-ira-mistakes-2012-03-16

[JG EA]

Thanks, I love flow charts. Made by the people that make cookies.

[Roland Slugg]

That flow chart is real purdy, but it doesn't answer the question being discussed here. If an IRA owner, over 70½, dies before receiving his RMD for the year of death, HIS year is over. And he wasn't required to take that year's distribution before he died, because that can be delayed until December 31st each year. Then the IRA becomes the property of his benes, and they aren't required to take their first distribution until the year after the YOD.

Accordingly, I question whether any distribution is necessary in the YOD. Flowcharts are nice, but let's see the law ... i.e. the Code or Regs.

[Y2KEA]

From: http://www.irs.gov/retirement/partic...211444,00.html
Required minimum distributions after the account owner dies

For the year of the account owner’s death, use the RMD the account owner would have received. For the year following the owner’s death, the RMD will depend on the identity of the designated beneficiary.

From: http://www.cpask.com/new/cpask/conte...11093&sample=1
DEATH OF THE IRA OWNER

If the IRA owner dies on or after the required distribution beginning date, a distribution must be made in the year of death, as if the IRA owner had lived the entire year. If the distribution is after the owner’s death, the minimum amount must be distributed to a beneficiary.

So it appears the beneficiary must take the original RMD in the YOD or the year following if not made in YOD.