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Passing/RMD
Old 11-09-2012, 01:02 PM   #1
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Passing/RMD

Just wondering what happens when you pass away during your RMD's? Does all your tax-deferred immediately become income to your estate and taxes due upon passing? Or are your beneficiaries obligated to continue to take RMD's against your portfolio annually over a period of time? I realize any wills or trusts may specify this. Just wondering what happens if someone does not have a will/trust.
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Old 11-09-2012, 01:15 PM   #2
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An IRA? The funds become an inherited IRA only if the deceased IRA owner designated someone as the IRA beneficiary (specified with the IRA account itself, generally not via will/trust). Beginning in the year after the original owner's death, non-spouse IRA beneficiaries must begin withdrawals per a different RMD schedule. Each year's taxable portion of tIRA withdrawals by the beneficiary are taxed at the beneficiary's ordinary income rate for the tax year of withdrawal.
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Old 11-09-2012, 10:48 PM   #3
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Quote:
Originally Posted by GrayHare View Post
An IRA? The funds become an inherited IRA only if the deceased IRA owner designated someone as the IRA beneficiary (specified with the IRA account itself, generally not via will/trust). Beginning in the year after the original owner's death, non-spouse IRA beneficiaries must begin withdrawals per a different RMD schedule. Each year's taxable portion of tIRA withdrawals by the beneficiary are taxed at the beneficiary's ordinary income rate for the tax year of withdrawal.
As I understand it the same rule applies to 401ks. Note that if estate tax is paid it can be deducted from the tax due on the distribution. Thus no 70% tax on distributions as I had once thought.
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Old 11-10-2012, 12:22 AM   #4
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Note that if estate tax is paid it can be deducted from the tax due on the distribution. Thus no 70% tax on distributions as I had once thought.[/QUOTE]

Don't think it quite works like that. The estate tax is a deduction (not a credit) on the income tax return so it reduces the total taxation but not as much as you suggest. How to Calculate the Estate Tax Deduction - For Dummies
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