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Infolawyer
Infolawyer, Attorney
Category: Estate Law
Satisfied Customers: 50622
Experience:  Licensed attorney helping individuals and businesses.
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My father passed away in January 2013, at age 65. He left

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My father passed away in January 2013, at age 65. He left his IRA to a qualified trust. The trust document directs that the IRA be distributed outright to his spouse (40%) and to his 4 adult children (15% each). Five inherited IRAs have been established, although to date, there has only been a partial distribution. Three questions: First, Pub 590 states that, in this case, RMDs are based on oldest beneficiary (spouse). But I have read in a couple other places (Charles Schwab) that it is based on oldest non-spouse beneficiary. Which is it? Second, is RMD calculated on the value of the deceased's IRA as a whole, or on the value of each of the 5 inherited IRAs individually? As in, if one beneficiary takes a lump sum payment in the year following the year of death, does that take care of the RMD for everyone? And lastly, because the spouse is not able to roll the IRA over into her own account and has to keep it in an inherited IRA, I have read that she can not name her own beneficiaries, that if she dies, the remaining balance would get distributed among the remaining living beneficiaries. Is this true?
Submitted: 11 months ago.
Category: Estate Law
Expert:  Infolawyer replied 11 months ago.

Infolawyer :

Hello and thank you for the question. I am sorry to read of this dilemma.

Infolawyer :

I will answer each of your questions in turn

Infolawyer :

the rmd is based on the oldest non spouse beneficiary

Infolawyer :

The rmd in this situation is based on the amount in the individual account created for each beneficiary child

Infolawyer :

Each beneficiary may name his or her own beneficiary, which should be done in the account, by will or trust.

Infolawyer :

I wish you the best and a nice weekend. Kindly let me know if the answer is acceptable.

Infolawyer :

awaiting your reply on review of the answers.

Customer:

As I understand it, the RMD is based on the account value on 31 December of the prior year, e.g. Value on 31 December 2013 is used to calculate the RMD for 2014. It doesn't appear that the IRA will be fulling distributed by 31 December though. So how is RMD figured when there has only been a partial distribution and an amount still remains in the trust's IRA?

Infolawyer :

correct

Infolawyer :

that is the general rule

Infolawyer :

it can only be based on amounts in individual accounts as distributed out of the trust

Customer:

What of the amount remaining in the trust as of Dec 31?

Infolawyer :

with the rmd based on what went into the specific sub ira accounts to non spouse beneficiaries

Infolawyer :

that is excluded

Customer:

Excluded? The IRS is still going to want their "fair share".

Infolawyer :

this is amount that did not pass to the beneficiaries correct?

Infolawyer :

or at least not yet?

Customer:

It passes to the beneficiaries. The estate is just wrapped up in a legal quagmire at the moment and the distribution likely will not happen prior to the end of the year.

Customer:

The trust states that the proceeds are to be distributed outright. There are no legal strings attached.

Infolawyer :

where there is vested interest

Infolawyer :

and it passes to the beneficiaries

Infolawyer :

no strings attached, there is a tax due

Infolawyer :

so the trust amount which goes to the beneficiary would be taxable

Infolawyer :

based on such facts

Infolawyer :

I wish you the best.

Customer:

So is the trustee (also one of the beneficiaries) responsible for paying the RMD out of any undistributed portion that remains in the trust?

Infolawyer :

to the extent of his personal share

Infolawyer :

on his personal share

Customer:

So each beneficiary is responsible to pay the RMD on their share of the entire IRA, regardless of whether they've received their share in its entirety?

Infolawyer :

correct

Customer:

great.

Infolawyer :

have a nice day

Infolawyer :

Kindly click on an excellent rating for the answer.

Infolawyer, Attorney
Category: Estate Law
Satisfied Customers: 50622
Experience: Licensed attorney helping individuals and businesses.
Infolawyer and 6 other Estate Law Specialists are ready to help you

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