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RMDs for Inherited IRA and Inherited-Inherited IRA when splitting account

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  • RMDs for Inherited IRA and Inherited-Inherited IRA when splitting account

    I made a similar post about this a few months ago, but have since figured out some more, and as of now neither the pros at the current institution (ML) or my gaining institution (Fido) really seem to have this straight...so I'm going to posit it to y'all since some of y'all have either dealt with this personally, or are pros yourselves.

    Grandfather died at age 98 in 2016, Mother inherited traditional IRA.  She made a year-of-death RMD for 2016 per Table III.  Mother dies in 2017 without taking an RMD, I and 2 siblings inherit the inherited IRA, as well as her traditional IRA.

    A few bits from IRS pub 590-b:
    Distributions in the year of the owner's death.   The required minimum distribution for the year of the owner's death depends on whether the owner died before the required beginning date, defined earlier.  If the owner died before the required beginning date, there is no required minimum distribution in the year of the owner's death. For years after the year of the owner's death, see Owner Died Before Required Beginning Date later, under IRA Beneficiaries. If the owner died on or after the required beginning date, the IRA beneficiaries are responsible for figuring and distributing the owner's required minimum distribution in the year of death. The owner's required minimum distribution for the year of death generally is based on Table III (Uniform Lifetime) in Appendix B.

    Death of a beneficiary. In general, the beneficiaries of a deceased beneficiary must continue to take the required minimum distributions after the deceased beneficiary’s death, based on the distribution schedule established by that beneficiary under the rules in the following paragraphs. The beneficiaries of a deceased beneficiary do not calculate required minimum distributions using their own life expectancies.







    Owner Died On or After Required Beginning Date


    If the owner died on or after his or her required beginning date (defined earlier), and you are the designated beneficiary, you must base required minimum distributions for years after the year of the owner's death on the longer of:



    Surviving spouse is sole designated beneficiary.   If the owner died on or after his or her required beginning date and his or her spouse is the sole designated beneficiary, the life expectancy the spouse must use to figure his or her required minimum distribution may change in a future distribution year. This change will apply where the spouse is older than the deceased owner or the spouse treats the IRA as his or her own.






    Owner Died Before Required Beginning Date


    If the owner died before his or her required beginning date (defined earlier), and you are the designated beneficiary, you generally must base required minimum distributions for years after the year of the owner's death using your single life expectancy shown on Table I in Appendix B as determined under Beneficiary an individual, later.







    Multiple individual beneficiaries.   If as of September 30 of the year following the year in which the owner dies there is more than one beneficiary, the beneficiary with the shortest life expectancy will be the designated beneficiary if both of the following apply.

    • All of the beneficiaries are individuals, and

    • The account or benefit has not been divided into separate accounts or shares for each beneficiary.



    Separate accounts.  A single IRA can be split into separate accounts or shares for each beneficiary. These separate accounts or shares can be established at any time, either before or after the owner's required beginning date. Generally, these separate accounts or shares are combined for purposes of determining the minimum required distribution. However, these separate accounts or shares will not be combined for required minimum distribution purposes after the death of the IRA owner if the separate accounts or shares are established by the end of the year following the year of the IRA owner's death.



    So if I get this straight:


    • Since the original owner died in 2016 at age 98, then my mother's only option would have been to take the Table III year-of-death RMD for my grandfather in 2016, meaning 1/7.1 = 14.1%.

    • Also since he died after 70 1/2, then she would have drawn based on her life-expectancy rule, being 66 in the year post-death (2017), would be 20.2 this year per Table I.

    • For the inherited-inherited IRA (orig Grandfather), I would have to continue her Table I RMD schedule as a beneficiary of a beneficiary, as such would draw 1/(2037.2-year) each year, so 1/20.2 (4.95%) in 2017, 1/19.2 (5.21%) in 2018, 1/18.2 (5.50%) in 2019, etc

    • Mother died before age 70 1/2, so no table III year-of-death RMD for her.

    • For the inherited IRA (orig Mother), I would base it on my own life expectancy the year following her death, being 34 in 2018 would be 49.4 years per Table I, and would have to withdraw 1/(2067.4-year) each year starting in 2018, which would be 1/49.4 (2.03%) in 2018, 1/48.4 (2.07%) in 2019, etc.

    • Since the accounts are being split, they would not need to be combined for the purposes of RMDs


    Biggest question is, how would the 2017 RMD be done since the 12/31/2016 value was before being split?  Would I just have to withdraw my share of it?  Say it was $300,000 then, would I just figure it on my one-third share ($100,000, so $4,950) and withdraw it from my new account, or would we need to pull it out of the old one before splitting it to simplify the record-keeping?

  • #2
    Yes, you seem to have everything down.

    Although I will admit you threw me for a loop with your math on divisors until I figured out what you were doing. I have never seen anyone do it any other way than determine what the original divisor is, then simply decrease it by one each year without regard to what the first or subsequent calendar years were.

    Yes, you would each take your proportional share of the 12/31/2016 balance of the inherited-inherited IRA before it was split to determine your individual 2017 RMDs. Then you would use your own 2017 year end balances for both the inherited-inherited IRAs and the inherited IRAs to determine their respective RMDs.

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