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A friend of mine died in mid-November, 2012. She was 88 years old. She had not taken her RMD for 2012 by the time of her death. She had three beneficiaries for the IRA and they inherited roughly equal shares (34,33,33%).

The beneficiaries are taking out their proportional share of what the decedent should have taken for 2012 and are doing so before year end.

My questions are: How does anyone think the IRS will view all of this? Do the inheritors also have to take something else out for 2012?

The inheritors are a nephew and two nieces as the decedent had no children of her own.

Poz
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A friend of mine died in mid-November, 2012. She was 88 years old. She had not taken her RMD for 2012 by the time of her death. She had three beneficiaries for the IRA and they inherited roughly equal shares (34,33,33%).

The beneficiaries are taking out their proportional share of what the decedent should have taken for 2012 and are doing so before year end.

My questions are: How does anyone think the IRS will view all of this? Do the inheritors also have to take something else out for 2012?


Everything's correct. The beneficiaries' RMD's from their inherited IRAs don't kick in until the year after death. Had the decedent taken her 2012 RMD before she died the beneficiaries wouldn't have had to take anything in 2012.

Details are in IRS Pub 590.

Phil
Rule Your Retirement Home Fool
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Phil

Thank you for your input. I kinda thought that strategy would be OK but like I said to the beneficiaries, I'm not a tax consultant and I don't play one anywhere, if you want competent advice, seek out a tax professional.

Poz
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Thank you for your input. I kinda thought that strategy would be OK but like I said to the beneficiaries, I'm not a tax consultant and I don't play one anywhere, if you want competent advice, seek out a tax professional.

Poz


While Phil deserves every Kudos sent his way for his generosity in posting, this is exactly the kind of post that is great for chat room boards. Sadly, enough of us have dealt with this very issue so that even the most tax challenged can give decent input. Sorry for the loss of your friend.

One note of caution, when it comes to next year, assuming that the people inheriting the IRA's roll it over to an , inherited IRA rather than cash it in, which is an option, they will need a copy of the death certificate to process the RMD on their inherited IRA. The administrator of my inherited IRA failed to realize this when I rolled it over earlier this year, and so now we are scrambling to get all our ducks in a row before years end.

RIP, Dad.

IP
applying her inheritance towards the kids' college expenses just as Dad wished, but gratefully keeping the tax deferred funds as such and using other funds to pay
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One note of caution, when it comes to next year, assuming that the people inheriting the IRA's roll it over to an , inherited IRA rather than cash it in, which is an option, they will need a copy of the death certificate to process the RMD on their inherited IRA. The administrator of my inherited IRA failed to realize this when I rolled it over earlier this year, and so now we are scrambling to get all our ducks in a row before years end.

This doesn't make any sense. I could see requiring the death certificate to establish the inherited IRA, but what earthly need would the custodian have for it when the beneficiary wants to make a withdrawal? Sounds like just another financial "service provider" who forgot whose money it is.

Phil
Rule Your Retirement Home Fool
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This doesn't make any sense. I could see requiring the death certificate to establish the inherited IRA, but what earthly need would the custodian have for it when the beneficiary wants to make a withdrawal? Sounds like just another financial "service provider" who forgot whose money it is.


the custodian /administrator?/broker of my inherited (from Mom) didn't have a clue- but she did admit it and recommended I find a tax-guy

I went with reading the Pub 78 times
..... probably did it wrong (>:
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I could see requiring the death certificate to establish the inherited IRA...

Which I assume was the reason for it. They didn't ask for it until now, when an RMD was required, still in the first year of the inherited IRA being established.

Either way, one will be needed.

IP
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This doesn't make any sense. I could see requiring the death certificate to establish the inherited IRA, but what earthly need would the custodian have for it when the beneficiary wants to make a withdrawal? Sounds like just another financial "service provider" who forgot whose money it is.

Phil
Rule Your Retirement Home Fool


Phil,
There are some crazy requirements occurring on the brokerage side.

I opened an educational IRA in October 2012 at a brokerage (I have had a taxable account with
the same brokerage for 12 years, plus I opened another educational IRA account for another family
member there going on three years now). I had to enter my SS# when I established this new educational IRA.
About a month later the brokerage contacted me and indicated I need to provide my SS# and other data.
I responded via email that I have an existing account with the brokerage and they should use
data from that account as validation. Quiet for about three weeks. Then, this week I received a
more strongly worded email- "provide SS# and other data or lift security freeze on a credit
bureau for us to validate, otherwise ..." I called them up, talked to a live person and they indicated
it was a new requirement. I have never had to validate data about myself when I have
previously opened accounts, IRA or otherwise.
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Phil,
There are some crazy requirements occurring on the brokerage side.


Well, now you have me worried. Got an email from my broker today that they received the legible death certificate and would "keep me posted." About what? Are they trying to tell me that for some reason they won't be able to establish an inherited IRA? That would be disastrous this year.

IP
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Are they trying to tell me that for some reason they won't be able to establish an inherited IRA? That would be disastrous this year.

Be calm. I assume you're worried about completing the decedent's RMD by 12/31. If for some reason you fail I think you'll find leniency when you request that the penalty be waived, especially when you show that you've been trying to comply.

Phil
Rule Your Retirement Home Fool
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Be calm. I assume you're worried about completing the decedent's RMD by 12/31. If for some reason you fail I think you'll find leniency when you request that the penalty be waived, especially when you show that you've been trying to comply.

So only the RMD is in play? I was concerned that the full amount wouldn't roll over and I would have to deal with that as income.

IP
probably never needing to deal with this again
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I was concerned that the full amount wouldn't roll over and I would have to deal with that as income.

In a worst case scenario a beneficiary must withdraw the entire amount within 5 years after the year of death. It can go much longer than that.

See Pub 590.

Phil
Rule Your Retirement Home Fool
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