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.
You can always take out more than the RMD in any year.
It looks like it would have been more straight forward if the account was split in the first year. However, since one account will be 0, the RMD on the remaining account will be easy enough to compute.
But perhaps there is some twist here that I don't see.
Remember that the non spouse inherited IRA funds must be moved by a trustee to trustee transfer. Any distribution made to a beneficiary will be taxable and cannot be rolled over. But if one beneficiary desires a total taxable distribution, this can be done anytime as well. If a total interest is withdrawn by the date above, the remaining beneficiary will be deemed to have established their separate account. If the total distribution occurs later, the remaining beneficiary must still use the oldest beneficiary life expectancy for RMDs.
There are two other actions to complete as well:
1) Make sure that there was no IRA basis from non deductible contributions inherited by the beneficiaries. If there is, the beneficairies can file an 8606 each year and a portion of their RMD will not be taxable.
2) Each beneficiary should name their own successor beneficiary ASAP.
Just curious about the actual splitting. Do you know how they split holdings to be fair to each beneficiary? Timing of sales and such would seem to be a factor in ensuring you could have two new accounts that at least started out as equal dollar wise.
williamg wrote:Just curious about the actual splitting. Do you know how they split holdings to be fair to each beneficiary? Timing of sales and such would seem to be a factor in ensuring you could have two new accounts that at least started out as equal dollar wise.
I split my mother's IRA 5 ways between 5 siblings ASAP after her death.
Set up 5 Schwab inherited IRA accounts and then sent a letter of instruction to Schwab on how to do the split from 1 to 5.
It was mostly mutual funds so shares were split 5 ways equally. A few assets weren't good candidates
to split, so I divvied those up after discussions with my siblings and just made sure the total account values on
the date of split were equal. So everybody on day one was equal with an almost identical diversified portfolio.
A jointly owned inherited IRA sounds like a real potential mess.
People have very different ideas about what to do with inherited money.
I certainly wouldn't do the 50% withdrawal while the account is still in joint ownership.
If it's like a regular joint account, the owners would both have rights to the remaining balance, even though one received the proceeds from the 50% distribution.
What happens if one co-beneficiary dies? Assume can go to his/her stated beneficiary which means having a way to split the account is necessary or does it usually revert to the surviving beneficiary?
In order to avoid accounting issues, most IRA custodians will create separate inherited IRA accounts for each beneficiary at the time they order their first distribution, RMD or otherwise.
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