I’m a widow and my children are my IRA beneficiaries. When I die, how do they handle my Required Minimum IRA Distributions, known as RMDs?
If you die before taking your annual RMD, your executor must take it on behalf of your estate, ideally before year-end.
The executor will deposit the RMD in a bank account that he or she has created for your estate; and it will be included as taxable income on your final income tax return, which your executor is responsible for filing. After your taxes and outstanding bills have all been paid, the executor will distribute what’s left in the estate account to your heirs.
Unlike your last RMD, the IRA doesn’t go into your estate account. It’s distributed directly to the named beneficiaries. After your final RMD has been withdrawn, the IRA custodian must divide the IRA into Inherited IRAs for your children. (For example, if you leave a $135,000 IRA after the last RMD, naming your three children as equal beneficiaries, each child gets a $45,000 Inherited IRA.) Your name must still be listed on each Inherited IRA along with its beneficiary’s name. For example, if you’re Susan Jones, your son Frank’s Inherited IRA is titled: “Susan Jones IRA (deceased) for the benefit of Frank Jones.”
The children must start taking their own RMDs from these accounts no later than Dec. 31 of the year after your death. (If you died in 2015, for example, their first RMD must be taken by Dec. 31, 2016.) The kids’ RMDs are based on their own life expectancies, listed in the Single Life Expectancy Table for Use By Beneficiaries, which they’ll find in Appendix C of IRS Publication 590, available at irs.gov.
THE BOTTOM LINE If you die before taking your annual RMD, your executor takes it on behalf of your estate.
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