RMD Check Payable to the Deceased

[TXEA]

Have not encountered this before, but here is what the bank did. Taxpayer passed away in the middle of the summer, so no rush here. The deceased taxpayer named her two daughters as the beneficiary of her IRA. The deceased was not married.

The taxpayer died before taking 2013 RMD which happens quite frequently.

The bank made the 2013 RMD check payable to the deceased and knowing she was deceased (not the estate) while having valid beneficiary paperwork on file naming the 2 daughters as the beneficiary. The Regs require named beneficiaries to receive the distribution in the year of death if an RMD is required. If no named beneficiary is on file, then the estate representative must request the RMD for the estate.

So, in essence, I have a 1099R in the name of the deceased for an IRA distribution paid to her after she died.

At issue, non-probate assets (and associated income) are generally not reported on Form 1041. Does anyone see a problem with nominee reporting of an IRA distribution from the 1040 to the named beneficiaries?

Why don't people call?

[Burke]

Is a tax return going to be filed for the deceased? If so, this 1099R will match to her SSN, assuming that is the tax id number on the 1099R. You can report it on Line 16 and deduct it on Line 20, and then report 1/2 on each of the bene's returns. Check should have been returned to the bank for reissue and correction, but I guess that is too late now. Because the IRA had named beneficiaries, it does not go through the estate.

[TXEA]

Thanks for thoughts. That is what I was planning to do, but wanted to see if someone had a different idea (although it is probably the only thing to do).

[Burke]

You are lucky its in the same tax year as the DOD. When its in the next tax year, its a real problem, especially if there is withholding.

[Traveling EA]

RMD after death

My mom died the end of February 2012. RMD had not been taken. The day after the she died, the bank distributed her RMD to her bank accounts, so it was taken care of. The beneficiaries were myself and 5 siblings. My mom was in a 0 tax bracket. Had the bank not done this, each of us would have been responsible for the RMD at our tax rate. We still have to pay taxes on our share of the IRA, but it is a smaller share due to the RMD having been utilized.

[TXEA]

My mom died the end of February 2012. RMD had not been taken. The day after the she died, the bank distributed her RMD to her bank accounts, so it was taken care of. The beneficiaries were myself and 5 siblings. My mom was in a 0 tax bracket. Had the bank not done this, each of us would have been responsible for the RMD at our tax rate. We still have to pay taxes on our share of the IRA, but it is a smaller share due to the RMD having been utilized.

That is all fine and well; however, if you and your five siblings were named beneficiaries of the account, then this was not a permissable transaction. A deceased person can not receive an RMD. If you were not named beneficiaries, then only the estate receives the RMD, and if the estate receives it, you and your five siblings receive the same amount of income that you would have had if the bank had processed the RMD correctly.

Further, if your mother had passed away, it was not correct to report the income on her final Form 1040 in any circumstance unless she had a surviving spouse who had not remarried by the end of the year.

So, it should be made clear to others reading this, the RMD can not be paid to a deceased individual. Two choices only: The beneficiaries or the estate.

As a professor I had once told the class "dead people never report income"

[Burke]

Most people do this because the 1099R has the deceased's name and social security number on it. But that is incorrect. The check should be returned to the payor and redrawn to the named beneficiaries immediately.

[Burke]

My mom died the end of February 2012. RMD had not been taken. The day after the she died, the bank distributed her RMD to her bank accounts, so it was taken care of. The beneficiaries were myself and 5 siblings. My mom was in a 0 tax bracket. Had the bank not done this, each of us would have been responsible for the RMD at our tax rate. We still have to pay taxes on our share of the IRA, but it is a smaller share due to the RMD having been utilized.

You were still liable for reporting the IRA on your tax returns. Just because the bank did it incorrectly, does not mean that the liability was avoided. It should have gone on the estate return (1041) and K-1's parceled out to the beneficiaries to report the income. This happens all the time with other payments like dividends and interest because the executors or whoever is handling the estate do not take the time to allocate items received before and after death.