Passing/RMD

[Idnar7]

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.

 

[GrayHare]

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.

 

[meierlde]

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.

 

[kaneohe]

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