Vanguard transaction: "Death distribution" ?

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Topic Author
Cara
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Vanguard transaction: "Death distribution" ?

Post by Cara » Sat Jul 20, 2019 6:03 pm

8 months after inheriting money from my aunt into an "inherited ira" @ Vanguard, transactions are showing up that just say, "DEATH DISTRIBUTION PARTL MMF JRL ... " with the account number following. Small amounts, and separate from the normal RMD that comes out each month.

No explanation of why these additional distributions from Vanguard, on the statement or website.

Anyone able to tell me why, or do I have to contact them?

HomeStretch
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Re: Vanguard transaction: "Death distribution" ?

Post by HomeStretch » Sat Jul 20, 2019 7:32 pm

If it was my account, I would call Vanguard Monday morning about any unknown distributions. Good luck!

delamer
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Re: Vanguard transaction: "Death distribution" ?

Post by delamer » Sat Jul 20, 2019 7:43 pm

Are these distributions that are being paid out to you or money going into the account’s settlement fund?

Topic Author
Cara
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Re: Vanguard transaction: "Death distribution" ?

Post by Cara » Sat Jul 20, 2019 8:04 pm

Distributions being transferred to my taxable brokerage account where I have a MM settlement fund. I guess because they are RMDs they cannot remain in the IRA settlement fund, right?

delamer
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Re: Vanguard transaction: "Death distribution" ?

Post by delamer » Sat Jul 20, 2019 8:10 pm

Cara wrote:
Sat Jul 20, 2019 8:04 pm
Distributions being transferred to my taxable brokerage account where I have a MM settlement fund. I guess because they are RMDs they cannot remain in the IRA settlement fund, right?
Did Vanguard calculate the RMD for you?

Topic Author
Cara
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Re: Vanguard transaction: "Death distribution" ?

Post by Cara » Sat Jul 20, 2019 10:24 pm

Yes..

delamer
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Re: Vanguard transaction: "Death distribution" ?

Post by delamer » Sat Jul 20, 2019 11:50 pm

Cara wrote:
Sat Jul 20, 2019 10:24 pm
Yes..
Maybe there was a miscalculation and the additional distributions are to adjust the amounts?

Topic Author
Cara
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Re: Vanguard transaction: "Death distribution" ?

Post by Cara » Sun Jul 21, 2019 8:52 am

I guess i need to ask!

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mickeyd
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Re: Vanguard transaction: "Death distribution" ?

Post by mickeyd » Sun Jul 21, 2019 9:38 am

My guess is that there is a good answer out there that a call to VG will provide. Please let us know what VG says after you speak with them.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

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HueyLD
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Re: Vanguard transaction: "Death distribution" ?

Post by HueyLD » Sun Jul 21, 2019 9:40 am

delamer wrote:
Sat Jul 20, 2019 11:50 pm
Cara wrote:
Sat Jul 20, 2019 10:24 pm
Yes..
Maybe there was a miscalculation and the additional distributions are to adjust the amounts?
That's my guess as well.

Broken Man 1999
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Re: Vanguard transaction: "Death distribution" ?

Post by Broken Man 1999 » Sun Jul 21, 2019 3:15 pm

Could it have been dividend distributions?

Maybe they were in the pipeline, just not credited in time for the RMD.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

delamer
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Re: Vanguard transaction: "Death distribution" ?

Post by delamer » Sun Jul 21, 2019 3:45 pm

Broken Man 1999 wrote:
Sun Jul 21, 2019 3:15 pm
Could it have been dividend distributions?

Maybe they were in the pipeline, just not credited in time for the RMD.

Broken Man 1999
That’s the type of thing I was thinking of.

I know the balance on December 31 is key. But is it the amount show in your online account as of 11:59 PM or does it include transaction that are in the pipeline too?

Alan S.
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Re: Vanguard transaction: "Death distribution" ?

Post by Alan S. » Sun Jul 21, 2019 5:27 pm

Agree that VG should be called for an explanation.

One possible explanation is that VG determined that aunt did not complete her 2018 RMD before passing. That becomes the responsibility of the beneficiary, although that type of shortfall is usually distributed in a lump sum, not added to periodic distributions.

Installment payments should not be set up within the first couple days or last couple days of a month because year end weekends and holiday defaults might result in a late distribution or a premature distribution. If late, the delinquent amount needs to be made up and Form 5329 filed if the prior year RMD was not completed. It sounds like this distribution schedule was put together around the end of last year. If the Jan payment was distributed early then each remaining payment for 2019 must be proportionately increased or 2019 will be short.

As for the year end 2018 balance on which the 2019 beneficiary RMD is calculated, it is the actual balance of the account that shows on the final Dec statement and on the Form 5498 report of year end value. The 1099R amount is what is reported as taxable with copy to the IRS, and what appears on that form should sync up with the year end account value.

chemocean
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Re: Vanguard transaction: "Death distribution" ?

Post by chemocean » Sun Jul 21, 2019 7:16 pm

In 2018, I inherited a Vangaurd IRA, for which the 2018 RMD was taken by the original owner. By the end of 2018, the original account was closed because all beneficiaries claimed their benefits. I had Vanguard calculate my RMD. I took their calculated RMD early in 2019. The RMD is showing up as a "Death Distribution" in the quarterly report.
During the on-line dialogue about the RMD, they specifically asked if all beneficiaries had claimed their benefit and the original account was closed. Perhaps, another beneficiary in your case has not claimed their benefit and the "Death Benefit" is not based on your age, but the age of the original owner or the oldest beneficiary because the original account is still open.

Alan S.
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Re: Vanguard transaction: "Death distribution" ?

Post by Alan S. » Sun Jul 21, 2019 10:05 pm

chemocean wrote:
Sun Jul 21, 2019 7:16 pm
In 2018, I inherited a Vangaurd IRA, for which the 2018 RMD was taken by the original owner. By the end of 2018, the original account was closed because all beneficiaries claimed their benefits. I had Vanguard calculate my RMD. I took their calculated RMD early in 2019. The RMD is showing up as a "Death Distribution" in the quarterly report.
During the on-line dialogue about the RMD, they specifically asked if all beneficiaries had claimed their benefit and the original account was closed. Perhaps, another beneficiary in your case has not claimed their benefit and the "Death Benefit" is not based on your age, but the age of the original owner or the oldest beneficiary because the original account is still open.
This issue has been subject to some debate over the definition of a "separate account". IRS guidance is not clear whether ALL beneficiaries must create separate accounts by the deadline or if the separate account rules can be applied separately to those that do create separate accounts. In practice, many beneficiaries who create their separate accounts ignore whether the others have or not and proceed to use their own life expectancy for RMDs without issue from the IRS. This allows those efficient beneficiaries not to be held hostage by the procrastinators who are late to the party.

In fact, if there are only two beneficiaries and one of them sets up a separate account, the other who did nothing now has their own separate account by default. That account will carry only that beneficiary's SSN. If there are 3 beneficiaries for example, and one creates a separate account, the remaining two will have to use the LE of the oldest of the two. The IRA custodian has no authority to force a particular RMD divisor because they have no way of knowing how many other accounts have been inherited.

Accordingly, I recommend that beneficiaries who have established their OWN separate account ignore what the others may or may not have done.

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Cara
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Re: Vanguard transaction: "Death distribution" ?

Post by Cara » Tue Jul 23, 2019 8:50 pm

I learn something (usually beyond my grasp, but I get something out of it) every time I post here.

Unfortunately, this actually turned out to be something really stupid. When I set up the RMD's, I told Vanguard to take from each fund proportionally. For some reason, I had about 96% in the VTSAX, and 4% in the MMF. So the 2nd distribution was the amount from the MMF.

I've eliminated that - all RMD is coming from VTSAX, now.

Sorry to make this more complicated than it had to be!

Alan S.
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Re: Vanguard transaction: "Death distribution" ?

Post by Alan S. » Tue Jul 23, 2019 10:30 pm

Originally, you thought that the MMF distributions were in addition to your RMD amount. Instead, it turns out that the total of both distributions X 12 is needed to reach your annual RMD. It's easy to do the math and check that the numbers confirm this.

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mickeyd
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Re: Vanguard transaction: "Death distribution" ?

Post by mickeyd » Thu Jul 25, 2019 9:03 am

I learn something (usually beyond my grasp, but I get something out of it) every time I post here.
I agree Cara. This is an inexpensive classroom.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

retiringwhen
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Re: Vanguard transaction: "Death distribution" ?

Post by retiringwhen » Thu Jul 25, 2019 9:32 am

mickeyd wrote:
Thu Jul 25, 2019 9:03 am
I learn something (usually beyond my grasp, but I get something out of it) every time I post here.
I agree Cara. This is an inexpensive classroom.
With high payback! I have learned so much here in the last 2 years, I can't imagine how much. And I thought I knew a decent amount about investing, taxes and retirement planning before I got here!

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