Inhertied IRA, multiple beneficiaries

[natiro]

Taxpayer's father died in 2012 prior to taking RMD from his IRA. There are 4 benficiaries. Separate accounts were set up by the end of 2012 for each beneficiary. Taxpayer forgot to take RMD, but his brother took out extra in anticipation that one of the beneficiaries might forget. The RMD is calculated as the amount the deceased would have had to take in 2012. Isn't the taxpayer still on the hook for filing Form 5329 and reporting the 50% penalty, along with an explanation in order to abate the penalty? I think that each beneficiary would have to take their proportional share and that even if one takes extra, it wouldn't count for the other beneficiaries. They believe that in the year of death, since the RMD was calculated based on the dad's RMD, that this strategy would work for that year. Any advice? Thanks!

[joanmcq]

Once the account is split, each bene has to take out their own RMD.

[mactoolsix]

From Pub 590:

Inherited from someone other than spouse.
If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. This means that you cannot make any contributions to the IRA. It also means you cannot roll over any amounts into or out of the inherited IRA. However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary.


Owner Died On or After Required Beginning Date

If the owner died on or after his or her required beginning date (defined earlier), and you are the designated beneficiary, you generally must base required minimum distributions for years after the year of the owner's death on the longer of:

Your single life expectancy as shown on Table I in Appendix C, or

The owner's life expectancy as determined under Death on or after required beginning date, under Beneficiary not an individual , later.



Here is how to determine the "designate beneficiary"

Multiple individual beneficiaries. If as of September 30 of the year following the year in which the owner dies there is more than one beneficiary, the beneficiary with the shortest life expectancy will be the designated beneficiary if both of the following apply.

All of the beneficiaries are individuals, and

The account or benefit has not been divided into separate accounts or shares for each beneficiary.


Since the RMD is based on the oldest beneficiary, it seems that it would not matter who takes the RMD as it is calculated on the sum total of now all four IRA accounts. But then who pays the income tax if only one takes the RMD?

Mike

[Burke]

Here is how to determine the "designated beneficiary"

Multiple individual beneficiaries. If as of September 30 of the year following the year in which the owner dies there is more than one beneficiary, the beneficiary with the shortest life expectancy will be the designated beneficiary if both of the following apply.

All of the beneficiaries are individuals, and

The account or benefit has not been divided into separate accounts or shares for each beneficiary.


Since the RMD is based on the oldest beneficiary, it seems that it would not matter who takes the RMD as it is calculated on the sum total of now all four IRA accounts. But then who pays the income tax if only one takes the RMD?
Mike

In the OP, the account was divided into separate accounts or shares for each beneficiary. So this would not apply. However, I am curious also -- in such a case where this DID happen, I would assume the one who took the money would be the one to pay the tax. How could it work any differently? Reading between the lines, perhaps it is saying this is just the method to calculate the amount that has to be withdrawn. Then each bene should withdraw their proportionate share of said amount. Otherwise, there would be big problems in the amount each should have inherited.