To RMD, or Not To RMD?

A client had a question the other day about taking an RMD from an inherited IRA. It was an interesting question that perhaps some of you have encountered but weren’t sure how to answer…the client wanted to know whether to take an RMD, or not take an RMD for the year of death on behalf of the now deceased IRA owner.

As a reminder, the IRS does not allow you to leave assets in your traditional IRA forever, you must begin taking required minimum distributions (RMD) after you turn 70½. You may delay your very first RMD until April 1st of the year following the year you turn 70½.

For non-spouse beneficiaries of an IRA, if the IRA owner died prior to taking his/her RMD, that beneficiary would take what’s commonly called a “year of death RMD” to avoid the 50% penalty for failing to take an RMD on time.

What happened in this case? The IRA owner turned 70½ last summer. She did not take an RMD in 2017. She passed away a few weeks ago and had not taken any RMDs yet. Does this non-spouse beneficiary now have to take a year of death RMD on her behalf because the owner turned 70½ last year?

The answer is NO. Why? Because under IRS rules, although the owner would have been required to take her very first delayed RMD by April 1st and a regular 2018 RMD this year had she lived, she passed away before her official required beginning date, April 1, 2018, so her non-spouse beneficiary does not have to take a year of death RMD.

IRS Publication 590-B says:

“If an IRA owner dies after reaching age 70½, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date.”

 

Source: IRS Publication 590-B for 2017 Returns

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