RMD 2008? Need help please...

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Gmaloof
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RMD 2008? Need help please...

Post by Gmaloof » Wed Dec 10, 2008 12:04 pm

I was hoping someone could answer the following question or provide a resource I could reference regarding IRS requirements as it pertains to taking a RMD in a traditional IRA account in the year a person dies.

My Father passed away on December 1, 2008 and he has a traditional IRA at Wells Fargo BanK. He had not made his RMD for 2008 prior to the time of his death. My Mother will eventually have the IRA transferred to her name but I'm concerned about the tax liabilites if any she would have for 2008? Should I wait until to 2009 to make the name change to the IRA? Is my Mother required to instruct Wells Fargo to take out my Father's RMD for 2008 prior to the end of 2008? Any and all help would be appreciated............

chaz
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Post by chaz » Wed Dec 10, 2008 12:32 pm

Gmaloof, Visit irs.gov and look at Publication 590.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

Sandy2
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Post by Sandy2 » Wed Dec 10, 2008 12:42 pm

I've been lurking for a while and this may be the time to jump in. I am sorry about the loss of your father. I lost my father in 2007 and had similar IRA issues. How old was your father? How old is your mother?

Your mother (or possibly technically your father's estate) needs to take your father's RMD this year. For next year she can rollover the IRA to her own name and take ownership of it. Is she old enough to have an RMD herself?

Call Wells Fargo and ask for their Estates department. Someone there should be able to help you. Then recheck their advice before you actually do anything. This is a common situation, I have learned.

ETA: Your Mom will have to pay income tax on the RMD but there shouldn't be any other unexpected tax liability related to this.

Gmaloof
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Location: Sacramento, CA

Post by Gmaloof » Wed Dec 10, 2008 1:26 pm

Sandy2 wrote: How old was your father? How old is your mother?

Your mother (or possibly technically your father's estate) needs to take your father's RMD this year. For next year she can rollover the IRA to her own name and take ownership of it. Is she old enough to have an RMD herself?
Hi Sandy,

Dad was 73 when he died and Mom is 80. Mom has a traditional IRA already established with Bank of America that she will be taking her 2008 RMD. I will make sure we take my fathers 2008 RMD from his IRA at Wells Fargo prior to Dec 31st. I guess the only remaining question is a timing issue. Should I have my Mother wait until 2009 to rollover my fathers IRA or can we do it prior to the end of this year?

My father also has a taxable, (non IRA) account at Wells Fargo I need to change to my mothers name. I was planning to change both accounts over prior to December 31, 2008 when I receive the death certificate. If I did that would my mother also have a RMD tax liability for 2008 on the rolled over IRA? This stuff is confusing..... :-)

pennywise777
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Post by pennywise777 » Wed Dec 10, 2008 2:38 pm

Look for Ed Slott's irahelp
forum

I'm not allowed to post addresses, yet.

Pennywise

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Mel Lindauer
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Ed Slott's Forum Link

Post by Mel Lindauer » Wed Dec 10, 2008 3:51 pm

pennywise777 wrote:Look for Ed Slott's irahelp
forum

I'm not allowed to post addresses, yet.

Pennywise
Here's a link to Ed Slott's forum were you can get solid answers to your questions: http://www.irahelp.com/phpBB/
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Taylor Larimore
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2008 tax return

Post by Taylor Larimore » Wed Dec 10, 2008 4:09 pm

Hi Gmaloof:

I am sorry to learn of your Father's death.

In my opinion, this is a year that your mother almost certainly needs the services of a good professional tax accountant to prepare her tax return and offer any needed advice to heirs.
"Simplicity is the master key to financial success." -- Jack Bogle

Sandy2
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Post by Sandy2 » Wed Dec 10, 2008 5:16 pm

Absolutely agree with Taylor L. I assumed you had a professional involved but were doing your own research too. Talk to whoever prepares your parents' income tax returns. If your Dad's estate was big enough for an estate tax return you need even more professional advice.

Having said that, I learned a lot going through this process myself and the most important thing I learned was to stay on top of every issue, along w/the pros, until you understand it.

Because your Dad was (significantly?) younger than Mom, his RMD is smaller than it would be for your Mom in future years. Your advisor can tell you the answer to this, but it may be worth NOT rolling over the IRA to your mom, and instead holding it separately as an inherited IRA for her. She has a choice of two ways to do the RMD's in future years (table 1 or table 3 of pub 590). One will be more advantageous than the other depending on the size of the IRA, and her specific needs. From what I remember you have a number of months before you have to settle the estate (I think it's 9 mos but don't recall right off the bat). So take a deep breath, talk to your pros, and then make a calm decision.

No matter what you do, your Mom owes income tax on the RMD that she is taking, just as your father would if he were alive. Their 2008 taxes are still calculated as if they were married even if they weren't married the whole year due to his death.

As for the non-IRA account, you do need some pro advice there. Again depending on size there can be major estate-planning issues in how it is titled. I don't know of any reason to do it before year-end. Unless it's very small, talk to an estate planner. I am a pretty do-it-yourself kind of person, my father knew he was terminally ill and laid things out very clearly for us, but I still had an accountant and estate-planning lawyer helping us.

ETA: also, w/regard to the IRA, there might be an option to pass some of it down to other beneficiaries such as yourself before your Mom takes ownership. Depends on whether there were contingent beneficiaries on the account. Talk to the pro...

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