No reason to hold up establishing the inherited IRAs, but that does not mean you have to rush to complete the RMD.How does this work tax wise? We're in this situation now where DW's dad passed. My calculations and our info from the IRA house shows he only took about 1/6th of what was the required RMD. We're holding up passing the IRA into 2 inherited IRAs (2 heirs) not knowing how to handle this. Should the RMD be taken by the estate before passing? That doesn't sound right as it would not be part of the estate. Would the heirs have to take the remainder of the RMD for 2024 based on DEC 31, 2023 balance? We're confused enough that we're considering taking the entire amount, about $44,000 out of the inherited IRA this year to avoid any issues. FIL passed in 2024.Assuming you are the beneficiary, you can take the remaining RMD after the account passes to you.
The year of death RMD must be completed by the beneficiaries, not the estate unless the estate IS the beneficiary. And it cannot be distributed to the beneficiaries until they establish their separate inherited IRA account. The Secure Act Regs have now extended the year of death RMD deadline to 12/31 of the following year. The year of death RMD is not changed by the death, it is the same as required of the decedent, based on the 12/31 prior year balance.
However, because the remaining year of death RMD will be taxable to the beneficiaries who receive it, those beneficiaries may want to consider whether they want the taxable income in the year of death or the year after. In the year after they will also have to take the first beneficiary RMD as well since FIL passed after his RBD.
Finally, note that unless there were IRAs with different beneficiaries, the year of death RMD can be completed in any combination between them. For example, if the beneficiary of inherited IRA #1 needs some cash now and beneficiary #2 does not, Bene 1 can take the entire remaining year of death RMD or any amount they wish. It does not have to be 50-50. Further, if Bene 1 wants to take their amount this year, and Bene 2 wants to wait until next year, they can do that.
Statistics: Posted by Alan S. — Wed Aug 28, 2024 7:33 pm — Replies 12 — Views 2235