Inherited IRA RMD question

[BarbWire]

Hi:

In January 2015 my 91yo father passed away, leaving his 403(b) to his widow and a small IRA to me. A "spousal rollover" transferred the 403(b) to my mother as a traditional IRA in her name. My inherited IRA is now styled as "IRA of Pop (deceased), benefitting DD".

Before the 403(b) could be transferred to my mother, TIAA-CREF had to distribute my father's 2015 RMD to her: withdrawn at his rate, but taxable income to her. Similarly, before transferring the IRA to me, TRowePrice took his 2015 RMD out as taxable income for me.

Starting in 2016, my mother would take RMDs at her rate (87 yo in 2015) and I at my rate (58 yo). So far, so good.

However, my mother passed away in December 2015. All 2015 RMDs had been satisfied. I will inherit the IRA sometime in 2016 (the estate entered probate this week).

QUESTION: given that she died in 2015, will the 2016 RMD be taken at her rate, or my rate? I have fingers crossed for the latter.

I called Vanguard (where her IRA is) and was told that they must take the RMD at her rate before I can inherit the IRA. Ugh. I called TRowePrice and was told that because she had already satisfied the 2015 RMDs at time of death, the 2016 RMDs would be at my rate. CSRs at both places were somewhat flummoxed by the death in one year, inherited in the next year wrinkle.

Does anyone have experience with this, or a link to a source/reference?

Thanks!

 

[Act2]

I'm in a similar situation, slight difference. Late-year 2015 family deaths with IRAs involved. Will be interested to hear what people say.


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[rodi]

First - sorry for your losses.

Since an RMD was taken in 2015, and your mom died in 2015, I would assume (but that's all it is- an assumption) that the RMD would be in the new rate (yours.)

My dad had already taken his RMDs for the year when he passed - we (sis and I both inherited) did not have to take anything at his rate later that year. We took our first RMDs the next year.

 

[Act2]

Thank you.


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[MBAustin]

Condolences, BarbWire - that's a lot of losses for you in a short time.

I inherited (½ of) an IRA after my mother died in February, 2014. She had taken a part of her RMD (she was getting monthly withdrawals) but her IRA custodian didn't mention RMDs as part of the inheritance transfer. I transferred the inherited IRA to Vanguard and fulfilled (my share of) the rest of the 2014 RMD at her rate, then asked Vanguard to calculate my RMD starting in 2015 at my rate.

Since she died in 2015, it seems odd to me that Vanguard would tell you that they couldn't transfer it until you took out RMD at her rate for 2016.

I would try Vanguard again and ask to be transferred to an inherited IRA specialist. Good luck!

 

[GrayHare]

Hi:
QUESTION: given that she died in 2015, will the 2016 RMD be taken at her rate, or my rate? I have fingers crossed for the latter.

My condolences for your losses. IRAs inherited by a spouse are treated in all regards as if those IRAs belonged to that spouse from the start. So the IRA your mom inherited from your dad effectively is hers and should have been retitled into her name before her death. If you (non-spouse) inherit her IRAs, including ones retitled into her name that had previously been her husband's, subsequent RMDs from those IRAs, such as the one for year 2016, will be based off your age not hers.

 

[GrayHare]

In my experience the big firm that handles these complex issues the best is Fidelity. Vanguard is next most reliable but it depends on the quality of your rep. As for TRP, even if they got this one right, they are a disaster waiting to happen. YMMV.

 

[powerplay]

I inherited 1/3 of an IRA in 2013 and the RMD was already satisfied for the year. I transferred my share of the IRA from EJ to Vanguard. The transfer was finalized in January of 2014. Vanguard asked me to provide the end of year value of the IRA and they calculated the RMD for 2014. I scheduled the RMD for December. There was never an issue about the RMD being taken at the rate of the deceased.

 

[BarbWire]

Thanks, all.

I am cautiously optimistic that the 2016 will be at my rate, but the confusing wrinkle is that she died in 2015, and I won't "inherit" until 2016. Sure wish I had an account at Fidelity so I could ask them for a third opinion!

T Rowe Price isn't great, but TIAA-CREF is the true nightmare! I'm glad that when I transferred my father's 403(b) to an IRA for my mother, I also moved it to Vanguard. Never again, TIAA-CREF!

 

[kaneohe]

BarbWire..........sorry for your recent losses. Don't know the answer to your question...........for the real answer, you could post your question in the retirement sub-forum at fairmark.com and look for a response by Alan S.

 

[Sarah in SC]

It should be as Powerplay said, you collect it in 2016, you get it at your rate. The spousal is treated differently than non-spouse beneficiaries, and that's probably the reason for the confusion.

I send this pdf (attached) out to folks who have questions about inheriting IRAs at Schwab, not sure if it would be useful for you or not.

 

[rodi]

I would try Vanguard again and ask to be transferred to an inherited IRA specialist. Good luck!

My personal experience is that Vanguard's customer service, in this area, is less than optimal. We were given misinformation when trying to transfer the IRA from my dad to my sister and myself. Additionally, they managed to lose MULTIPLE copies of the death certificate. In our case - the 4th death certificate sent actually got noted on the account.

(And don't get me started on the additional (multiple) death certificates to transfer title of the 529's my dad had set up for my son.)

Vanguard is great when you're alive... but sometimes sucks when the account holder dies.

 

[powerplay]

My personal experience is that Vanguard's customer service, in this area, is less than optimal. We were given misinformation when trying to transfer the IRA from my dad to my sister and myself. Additionally, they managed to lose MULTIPLE copies of the death certificate. In our case - the 4th death certificate sent actually got noted on the account.

(And don't get me started on the additional (multiple) death certificates to transfer title of the 529's my dad had set up for my son.)

Vanguard is great when you're alive... but sometimes sucks when the account holder dies.

Holy cow, I'd be pretty ticked off if my Vanguard experience was like yours. I wonder why there is such variation in our experiences with them.

 

[scrabbler1]

BarbWire, Sorry for your losses. My ladyfriend lost both of her parents only a few months apart in late 2014 and early 2015 and she was devastated.


As for your questions, I can't say I can add anything new to the sensible things written by others here. I can, however, share with you what my best (male) friend went through back in 2012 when his remaining parent (mom) suddenly passed away and he with his sister received a large inheritance.


There was an inherited IRA included in his mom's vast portfolio with Morgan Stanley Smith Barney and his mom had not yet taken her 2012 RMD. MSSB took the RMD which was a taxable event for his mom when her accountant filed her tax return. When my friend took the RMD from his inherited IRA in 2013 after transferring it to Fidelity (I am with Fido and we use the same Account Executive, a very smart guy, at our local branch), he took it at his rate based on his life expectancy and has done so every year since 2013.

 

[tulak]

My personal experience is that Vanguard's customer service, in this area, is less than optimal. We were given misinformation when trying to transfer the IRA from my dad to my sister and myself. Additionally, they managed to lose MULTIPLE copies of the death certificate. In our case - the 4th death certificate sent actually got noted on the account.



(And don't get me started on the additional (multiple) death certificates to transfer title of the 529's my dad had set up for my son.)



Vanguard is great when you're alive... but sometimes sucks when the account holder dies.

I went through this at Vanguard and I had an easy experience. My mom passed away before RMDs kicked in and the IRA had to be split between three beneficiaries. Vanguard took care of everything without any issues (I was executor of the estate).

I'd definitely call back and try to get someone who knows what they are doing. I think a lot of this luck depending on who's answering the phone.