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Old 05-23-2014, 06:06 PM   #21
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Thanks for posting this article, kaneohe. My sister and I were the beneficiaries of my mother's IRA and I had a hard time finding all the right information in one place to know what to do earlier this year - but I think we did end up with everything OK.

One question - we both have our inherited IRAs now, but only part of the RMDs were taken for this year. Do we need to each take of the remaining RMD this year or could (for example) one of us take 75% of it and the other 25% of it from our respective inherited IRAs? I've been looking for this info and haven't been able to find it yet.
THis would be a good exercise for me since I don't know the answer for sure and I'm leaving for the airport soon. May I suggest you ask on fairmark.com in the retirement subforum and look for a reply by Alan S.
He also posts on bogleheads.org so you could ask there also.
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Old 05-23-2014, 09:41 PM   #22
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Originally Posted by MBAustin View Post
Thanks for posting this article, kaneohe. My sister and I were the beneficiaries of my mother's IRA and I had a hard time finding all the right information in one place to know what to do earlier this year - but I think we did end up with everything OK.

One question - we both have our inherited IRAs now, but only part of the RMDs were taken for this year. Do we need to each take of the remaining RMD this year or could (for example) one of us take 75% of it and the other 25% of it from our respective inherited IRAs? I've been looking for this info and haven't been able to find it yet.
I'm not sure I fully understand your question. Was this for an IRA where your mother was already taking RMDs, but didn't take all of them for the year before passing away? And then before you took the full RMDs on your mother's IRA, you split her IRA into two inherited IRAs?

Once you receive an inherited IRA, then distributions are per IRA. This allows both you and your sister to choose what method you want to use, either life-expectancy or five-year method. RMDs at this point don't cross over, which makes me think maybe the RMDs on your mom's IRA weren't fully taken out for the year?

That would be an interesting situation and I don't know the answer. I think Kaneohe's advice is good in this regard, but please follow up once you figure this out since I think many of us would be curious to know how this is handled.
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Old 05-23-2014, 10:03 PM   #23
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I found the following at: Year of Death Required Minimum Distributions ~ Ed Slott and Company – IRA, Tax, Retirement Planning Articles, Insight

The article didn't say much, but the follow-up comment was interesting:
Quote:
Unofficially, IRS says that the deceased account owner's RMD should be pro-rated among the beneficiaries. The tax code says that the first money paid out of the account is the RMD. From the IRA custodian's perspective,
they usually want to split the account before any distributions are taken so that the distributions are correctly reported using the beneficiary's Social Security number.

Where does that leave you? If one beneficiary takes a distribution in the year of the account owner's death, those funds should be counted toward the account owner's RMD. If you decide to apportion the year of death RMD and one beneficiary does not take their share, then that beneficiary incurs the 50% penalty. And, if they do not report that penalty on Form 5329, IRS has ruled, and the Tax Court has upheld, that no return
has been filed, the statute of limitations does not start running, and the individual can be charged with failure to file penalties and interest in addition to the 50% penalty.
It seems to me that if you each received 50% of the original IRA, then you'd each want to pay 50% of the remaining RMD. It could be that the IRS wouldn't care, but in this case I'd agree with HTown Harry that it'd be less likely to raise IRS questions. What was also surprising is the amount of penalty. Ouch.

Here's another thread on the matter, stating that the IRS doesn't care how they receive their RMDs, only that they receive the full RMD (which must be paid by the beneficiaries): https://www.irahelp.com/forum-post/1...r-owners-death

The comments reference the following IRS regs, if you care to dig in further: Internal Revenue Bulletin - June 28, 2004 - T.D. 9130

As always, it would be best to verify with someone with more knowledge. I'm just digging up information on the internet and the information above may or may not be correct. It is an interesting question though.
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Old 05-23-2014, 10:03 PM   #24
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My friend's remaining parent (mom) passed away in 2012 so he and his sister split her IRA, each receiving an inherited IRA through Morgan Stanley Smith Barney, along with halfof a brokerage account. With my help, my friend moved both to Fidelity. His mom had not taken her RMD before she passed away so that was done first before the IRA was split up.

I recall his mom's name listed as part of the IRA's name, evenunder my friend's ownership. He took his RMD last year based on his own life expectancy in the denominator. That value will decrease by one each year until the IRA is exhausted. He cannot add any new money to this IRA but can, of course, withdraw any amount more than the RMD. For 2013, we simply rounded up to the next $100 and will do the same for 2014.

My friend doesn't need the RMD to cover his everyday expenses, se we arrange to have all of it (actually 99%, the most Fidelity allows) withheld for federal and state income taxes. This helps keep him in or at least closer to the "safe harbor" to avoid any underwithholding penalties and reduce or eliminate any need to make estimated tax payments. The inherited brokerage account generates a lot of investment income so it is fitting the inherited IRA generates some of the taxes due on it.
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Old 05-24-2014, 08:47 AM   #25
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I found this in the Ed Slott IRA discussion forum concerning ira rmd in year of owners death.

Seems it doesn't matter which inherited IRA is used or in what percentage to satisfy the owner's RMD (see alan-oniras' response).

In my case, the RMD had already been taken prior to mom's passing. So, the income will be reported on her final tax return and there probably won't end up being any taxes due since her income for this year will be so low. Otherwise, if we had to take the RMD it would have been reported on our taxes and taxed at our combined 25% fed/9.3% state rates.

It's not a big deal, but I guess it could be a consideration for others. Maybe getting the RMD done early in the year, especially if one's health is failing would be a good idea although it probably wouldn't be one of the first things you'd be thinking about.
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Old 05-24-2014, 09:03 AM   #26
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Originally Posted by ronin View Post
I found this in the Ed Slott IRA discussion forum concerning ira rmd in year of owners death.

Seems it doesn't matter which inherited IRA is used or in what percentage to satisfy the owner's RMD (see alan-oniras' response).
Thanks for that link. This is the key phrase
Quote:
They don't require it to be distributed equally to each beneficiary. If one of you needs the funds and the others do not, then that beneficiary could take the entire RMD and the other two would not have to receive a taxable distribution until 2011.
This is what I recall, but inherited IRA procedures are very confusing and neither the IRS nor the custodians are helpful. In the case of an Aunt this led to distributions being taken twice the year she passed away, costing the beneficiaries an additional tax burden.

I do recall from discussions here and elsewhere that once the beneficiary IRA accounts have been established each one must take RMDs each year, they can't be offset by withdrawals from other IRAs or accounts.
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Old 05-24-2014, 09:17 AM   #27
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... but inherited IRA procedures are very confusing and neither the IRS nor the custodians are helpful...
You are sure right about this. I am glad we are having this discussion. It is very educational and I would think important for many of us, if not now, surely at some point soon.

I found this little tidbit in the Boglehead's wiki interesting (just thinking out loud):

"If you establish multiple inherited IRAs you can make tax-free transfers between the inherited IRAs. Although the RMD must be figured on each individual inherited IRA, the RMD can be taken from any of the IRAs." Inheriting_an_IRA

Wonder what would stop multiple beneficiaries from shopping around among each other for the one with the lowest tax rate and making an under-the-table deal to pull out money at a low/no tax rate then split it up later?
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Old 05-24-2014, 09:31 AM   #28
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You are sure right about this. I am glad we are having this discussion. It is very educational and I would think important for many of us, if not now, surely at some point soon.

I found this little tidbit in the Boglehead's wiki interesting (just thinking out loud):

"If you establish multiple inherited IRAs you can make tax-free transfers between the inherited IRAs. Although the RMD must be figured on each individual inherited IRA, the RMD can be taken from any of the IRAs." Inheriting_an_IRA

Wonder what would stop multiple beneficiaries from shopping around among each other for the one with the lowest tax rate and making an under-the-table deal to pull out money at a low/no tax rate then split it up later?
Another great link.

I think the section you are quoting refers to multiple IRAs with different custodians or accounts but the beneficiary is the same.
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Old 05-24-2014, 09:35 AM   #29
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I just realized that has to be it. Duh. You can't co-mingle inherited IRA $$ with other IRAs but apparently you can move $$ around among various inherited IRAs if you have more than one. Makes sense.
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Old 05-24-2014, 12:04 PM   #30
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In my case, the RMD had already been taken prior to mom's passing. So, the income will be reported on her final tax return and there probably won't end up being any taxes due since her income for this year will be so low. Otherwise, if we had to take the RMD it would have been reported on our taxes and taxed at our combined 25% fed/9.3% state rates.
In my friend's case, his mom had not taken her RMD before she died (it was a sudden death from a car crash in August, 2012). However, in the 3 months between her death and when her IRA was finally split between my friend and his sister (it took so long partly due to Hurricane Sandy which slowed the administrator at MSSB a lot in November), the estate administrator took the RMD from her IRA and deposited it into her brokerage account's cash account. This meant that it was reported on her estate's income tax return, not those of her beneficiaries (my friend and his sister).
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Old 05-27-2014, 08:08 PM   #31
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Latest wrinkle... My sister wants me to have the whole IRA and we will adjust the value of the split from the taxable account. Now I have to contact the good folks at Chase and find out about the procedure for disclaiming and making sure it is per capita and not per stirpes. Well, I guess I needed to know more about this and now I get the opportunity to learn.
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Old 05-27-2014, 10:35 PM   #32
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Thanks for all of the helpful links everyone provided. It seems that 50/50 is the safest way to go but I'll read up on these as from a tax perspective (and the fact that my sister could use the RMD cash and I don't need it) we may do something different.
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Old 05-28-2014, 08:19 AM   #33
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I just realized that has to be it. Duh. You can't co-mingle inherited IRA $$ with other IRAs but apparently you can move $$ around among various inherited IRAs if you have more than one. Makes sense.
but be careful........even among inherited IRAs, I don't you can just transfer at will. I think you can do for the same type......same original owner but not different original owners. Also even if you inherit from the same person, possibly you may not be able to combine if some IRAs are original and some are inherited........the problem seems to be the RMD factor which can be different for different IRAs......if you transfer between IRAs w/ different factors,
the RMD amount becomes muddy if the factors are different.
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Old 06-22-2014, 11:50 AM   #34
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It is beginning to seem like I will never get to the end of this mess. First, after waiting and waiting I track down someone who said that they never received the letter of disclaimation from my sister, then when I inquired again they said it was not only received but had been processed. Then, after waiting and waiting again, I find they neglected to tell me that I had to initiate a whole new transaction to get the disclaimed half transferred to the IRA that was already set up. Wrote the required letter of instruction, went to the branch, got it notarized and faxed while I waited, saw the confirmation that the fax had been received. Then nothing. More waiting. More digging on my part. Latest is they are now saying that they never received the fax, I have to go back to the branch and start over.

Got to say, Chase's institutional process on this really sucks. The actual people that I have dealt with have been friendly and are trying to help, but there seems to be no training, no operations procedure or manual to consult, no follow up on anything, no communication between the Retirement Services center and the branch or any with me other than if I initiate and force the issue. Hard to believe that a giant bank that has this transaction which is something that has to be dealt with regularly, I mean people have IRAs and die all the time I'd think, and is so completely inept. This is the worst experience I've had dealing with a financial institution. Maybe it's unreasonable to expect them to do their job right.

So tomorrow I get to get on the horn and try to find someone that can get this resolved. Frankly, not optimistic that this will be the end of this saga.
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Old 06-22-2014, 12:55 PM   #35
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Ronin -
I understand your frustration. If it helps (which it probably doesn't), we had similar experiences with Vanguard. They are great for DIYers when the DIYers are alive... their customer service is awful for the beneficiaries of IRAs. It took months of aggressive follow up to get my dad's IRA transitioned to my sister and myself.
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Old 06-22-2014, 03:01 PM   #36
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A couple of things:

About RMDs, I think this has been answered, but a thread at bogleheads on the subject: Bogleheads € View topic - Deceased year RMD of inherited IRA has similar answers and some thoughts from Alan S.

About the disclaiming half of the IRA, you know that the taxes are going to be different between get $X of taxable (no taxes need to be paid) and $X of IRA (taxes need to be paid as it is withdrawn). You all may be OK with that, but it is not quite equitable.
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Old 06-22-2014, 04:00 PM   #37
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About the disclaiming half of the IRA, you know that the taxes are going to be different between get $X of taxable (no taxes need to be paid) and $X of IRA (taxes need to be paid as it is withdrawn). You all may be OK with that, but it is not quite equitable.
I get it perfectly and figured it out accurately. Unfortunately, my sister and her husband got a major bee in their bonnets over it and some ugliness ensued. Actually works to their advantage as they are in a higher tax bracket than me and they were going to withdraw it all up front. I saved them several hundred dollars by taking it on to my future income. It is not the only nasty episode either.

It's not the money as that is a drop in the bucket to me. The loss of trust, the passive-aggressive behaviors and other weirdness are pretty disturbing.
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Old 08-05-2014, 01:32 PM   #38
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Update:

Unfortunately, this whole ordeal is still pending completion of the last transaction: transfer of assets from Chase, the most incompetent financial institution I have ever had the misfortune to have to deal with, to my IRA custodian with whom I have had only an excellent, problem free relationship.

A month after the transfer request was sent to Chase, they claim that they never received it and I need to resubmit the request. Never mind that on multiple occasions previously they said the exact same thing about other submissions only to reverse their claim after double checking. They must have a pile of crap that everything gets tossed onto until someone complains and they have to look for it.

The are referring me to Dispute Resolution now. Lovely.
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