Under the secure act, do you have to take >

[badatmath]

the non spouse owners RMD for that year of death as in the past?

Or does date of death just start a 10 year period of do whatever I want when I want?

Having trouble searching for this it may not be known yet.

 

[SecondCor521]

My understanding is that the original owner of the IRA is still required to take the full RMD in the year of death.

The beneficiaries of the IRA have to remove all of the IRA within 10 years starting on 1/1 of the year after death.

So if Grandpa dies this summer of 2020, he (or his executor) has to take out the RMD for 2020 based on his numbers (age and 2019 ending balance). His beneficiaries must drain their respective inherited IRAs by 12/31/2030, the concluding date of ten tax years starting 1/1/2021.

This does present a planning opportunity that I read elsewhere. His beneficiaries can make their own distributions in fall of 2020 if the transfer process takes place fast enough. This would spread their taxes over 11 tax years, not 10.

I think it is still permissible for the beneficiaries to fulfil Grandpa's RMD requirement by their own withdrawals in 2020. So if Grandpa died on June 30 and was taking monthly RMDs and left his IRA to his three daughters, each daughter could take a distribution equal to 2 months of his RMD amount in order to satisfy his RMD requirement. And in fact the distribution doesn't need to be equal. Daughter 1 could take 3 months, daughter 2 could take 1 month, and daughter 3 could take 2 months, or any other combination that adds up to the remainder of Grandpa's RMD.

 

[badatmath]

Thank you that is quite interesting!

 

[tulak]

What happens if the executor takes out more than the RMD?

I’m wondering if they could cash-out the entire IRA as part of the estate, pay the appropriate amount of taxes, and then disperse the remaining funds to the beneficiaries?

I suspect it might not be advantageous in a lot of cases, but if possible, it could be worthwhile up to certain amounts. Assuming that it’s allowed.

 

[Winemaker]

Why does it always have to be grandpa?

 

[target2019]

Why does it always have to be grandpa?

Grandma didn't smoke.

 

[SecondCor521]

What happens if the executor takes out more than the RMD?

I’m wondering if they could cash-out the entire IRA as part of the estate, pay the appropriate amount of taxes, and then disperse the remaining funds to the beneficiaries?

I suspect it might not be advantageous in a lot of cases, but if possible, it could be worthwhile up to certain amounts. Assuming that it’s allowed.

No problem. They can take out any amount above the RMD. The "M" in RMD stands for Minimum.

They just have to pay taxes on whatever is taken out. And that amount loses all future tax-deferred compounding.

If it's a "small" IRA and the beneficiaries don't want to deal with the paperwork and requirements, then maybe it could make sense. Not to me, but maybe someone else.

ETA: gwraigty below is more correct. The beneficiaries must take out the remainder of the year of death RMD and can take out more if they wish, but that would be done after they had inherited it by beneficiary rule, not by the executor as part of the estate. (See https://www.irahelp.com/slottreport/taking-year-death-ira-minimum-distribution which is probably trustworthy.)

 

[gwraigty]

If an IRA/Roth IRA has beneficiaries named, those assets pass outside of probate. An executor would have no authority take a final RMD (if required), or do anything with the account(s). If an IRA/Roth IRA doesn't have beneficiaries named, then it becomes part of the estate where an executor would then be involved such matters.

 

[tulak]

It could also make sense if you’re in a high tax bracket for the next decade and the IRA isn’t large.

Just curious, since it doesn’t affect me. Probably my kids at some point, but hopefully that’s a ways off. Thanks for the follow-up.

 

[Bamaman]

Gosh, it's enough to make you get going and spend some $. Get less frugal even.

 

[pb4uski]

Gosh, it's enough to make you get going and spend some $. Get less frugal even.

Which will help goose the economy.

 

[Winemaker]

Grandma didn't smoke.

Reminds me of a joke, or maybe not.


While dating DW asked me if I smoked and I answered "No".
Then she asked if I smoked after sex, and I said, "I don't know, I never looked."

 

[Gill]

What happens if the executor takes out more than the RMD?

I’m wondering if they could cash-out the entire IRA as part of the estate, pay the appropriate amount of taxes, and then disperse the remaining funds to the beneficiaries?

I suspect it might not be advantageous in a lot of cases, but if possible, it could be worthwhile up to certain amounts. Assuming that it’s allowed.

The executor can't withdraw from the IRA if it is payable to named beneficiaries.
Gill

 

[tulak]

The executor can't withdraw from the IRA if it is payable to named beneficiaries.
Gill

True, but you could make it payable to the estate. Then liquidate the IRA, pay the taxes, and disperse the funds to the beneficiaries.

It could make sense if the beneficiaries are going to be in a high tax bracket for the next decade.

 

[Gill]

True, but you could make it payable to the estate. Then liquidate the IRA, pay the taxes, and disperse the funds to the beneficiaries.

It could make sense if the beneficiaries are going to be in a high tax bracket for the next decade.

Disbursing the funds would make it taxable to the beneficiaries.
Gill

 

[gwraigty]

The executor can't withdraw from the IRA if it is payable to named beneficiaries.
Gill

I'm starting to get a complex here. Am I on everyone's ignore list? I said this in post #8.

BTW, terms are being using incorrectly here. Beneficiaries are specifically named for POD/TOD. Heirs inherit via probate.

 

[Gill]

Under the secure act, do you have to take >

. Heirs inherit via probate.

Beg your pardon. Heirs to estates can be beneficiaries, legatees, devisees, and a few others. Where did you get your definition? If your definition is correct, what do you call someone who inherits through intestacy where there is no probate? I’ve been around for a while, but at least those were the terms when I was admitted to practice law in New York.
Gill

 

[Gill]

If an IRA/Roth IRA has beneficiaries named, those assets pass outside of probate. An executor would have no authority take a final RMD (if required), or do anything with the account(s). If an IRA/Roth IRA doesn't have beneficiaries named, then it becomes part of the estate where an executor would then be involved such matters.

Not necessarily. It would only become part of the probate estate if that was the terms of the IRA.
Gill

 

[gwraigty]

Beg your pardon. Heirs to estates can be beneficiaries, legatees, devisees, and a few others. Where did you get your definition?
Gill

I think tulak is misusing the term beneficiaries, hence my trying to make it clear in post #8, which appears to have been ignored per tulak's continued reference to beneficiaries in post #14. The use of the term beneficiary isn't correct in all cases, just as the term estate has different meanings, depending on if you're referring to federal/state estate tax or just what has to pass to heirs via probate.

IANAL, but I have experience with inheriting a retirement account as a named beneficiary. I've also inherited life insurance proceeds when the named beneficiaries were both deceased, which was an entirely different process. It's an important legal distinction between someone being a named beneficiary on a financial account or an insurance policy, vs. the accounts/policies having no named beneficiaries and being subject to probate where an executor/administrator would then have to become involved.

You can find many sources on Google that back this up.

 

[gwraigty]

If an IRA/Roth IRA has beneficiaries named, those assets pass outside of probate. An executor would have no authority take a final RMD (if required), or do anything with the account(s). If an IRA/Roth IRA doesn't have beneficiaries named, then it becomes part of the estate where an executor would then be involved such matters.

Not necessarily. It would only become part of the probate estate if that was the terms of the IRA.
Gill

What are you disagreeing with? OK, your bio says that you're an attorney. But how do you explain multiple sources that say that when no beneficiaries are named on an IRA, it's payable to the estate? The financial institution can't just keep it or pay it out to anyone they want to.

 

[Gill]

I think tulak is misusing the term beneficiaries, hence my trying to make it clear in post #8, which appears to have been ignored per tulak's continued reference to beneficiaries in post #14. The use of the term beneficiary isn't correct in all cases, just as the term estate has different meanings, depending on if you're referring to federal/state estate tax or just what has to pass to heirs via probate.

IANAL, but I have experience with inheriting a retirement account as a named beneficiary. I've also inherited life insurance proceeds when the named beneficiaries were both deceased, which was an entirely different process. It's an important legal distinction between someone being a named beneficiary on a financial account or an insurance policy, vs. the accounts/policies having no named beneficiaries and being subject to probate where an executor/administrator would then have to become involved.

You can find many sources on Google that back this up.

You’re making a distinction where none exists. I understand the difference between a named beneficiary and a devisee from a testamentary estate. Nevertheless, they are both described as beneficiaries. As I’ve seen on Facebook and other forums, your Google search isn’t equivalent to my law degree.

 

[Gill]

What are you disagreeing with? OK, your bio says that you're an attorney. But how do you explain multiple sources that say that when no beneficiaries are named on an IRA, it's payable to the estate? The financial institution can't just keep it or pay it out to anyone they want to.

It's not automatically payable to the estate. The terms of the IRA agreement may specify a different beneficiary.
Gill

 

[urn2bfree]

I don't know if SECURE changed the rules, but when my mother died- (January 2018) I inherited part of her IRA (divided up among my siblings). None of us had to take an RMD UNTIL DECEMBER 31, 2019...Not the same year as the death. And the amount is based on MY life expectancy.

As I understand the SECURE ACT changes about this- people now can no longer just take out the RMD based on life expectancy. The entire IRA must be dispersed within 10 years. It is not retroactive, so I will continue to only take my life expectancy based RMD from the inherited IRA.


EDIT TO ADD- as I corrected in a reply below (but thought I better also put here as and edit) - "I had forgotten that though she died in January, she had already taken the 2018 RMD, and that is why we had until the end of 2019...."

 

[swakyaby]

I don't know if SECURE changed the rules, but when my mother died- (January 2018) I inherited part of her IRA (divided up among my siblings). None of us had to take an RMD UNTIL DECEMBER 31, 2019...Not the same year as the death. And the amount is based on MY life.

I had a similar situation where my mother passed August 2018 but had withdrawn only half of her RMD for 2018. Each of my 4 siblings had to take out 25% of the remaining RMD that my mother was to receive that year by December 31 2018. After that, annual RMDs were based on our respective life spans.

We’re all 4 grandfathered in to the stretch IRA.

 

[urn2bfree]

I had a similar situation where my mother passed August 2018 but had withdrawn only half of her RMD for 2018. Each of my 4 siblings had to take out 25% of the remaining RMD that my mother was to receive that year by December 31 2018. After that, annual RMDs were based on our respective life spans.

We’re all 4 grandfathered in to the stretch IRA.

That's right. I had forgotten that though she died in January, she had already taken the 2018 RMD, and that is why we had until the end of 2019.... sorry I had forgotten that.