There are always questions that come up as to the correct way to handle the required minimum distribution (RMD) for the year of death of the IRA owner. Here are three things you need to know about the year of death RMD.
1. The RMD for the year of death will only need to be taken if the IRA owner died after his required beginning date. The required beginning date for IRAs is April 1 of the year following the year the IRA owner reaches age 70 ½. If the IRA owner dies before this date, there is no RMD required for the year of death. This is true even if the IRA owner is already age 70 ½ and even though he has already taken part of the RMD.
Example: Jack celebrates his 70th birthday in January of 2019. He reaches age 70 1/2 in July 2019. He takes half of his 2019 RMD. He dies in December 2019. No further RMD distributions need to be taken after Jack’s death because he died before his required beginning date (April 1, 2020).
2. The RMD for the year of death will be calculated as if the IRA owner had lived. If the IRA owner dies after her required beginning date, the year of death RMD must be taken. It will be calculated as if the IRA owner was still alive. In most cases, this means it will be calculated using the Uniform Lifetime Table. In the years that follow the year of death, the beneficiary will then use the Single Life Expectancy Table.
Example: Audrey, age 75, dies in 2019. The year of death RMD that must be taken from her IRA will be calculated using the factor that corresponds to age 75 on the Uniform Lifetime Table (22.9).
3. The beneficiary must take the year of death RMD. This is an area of great confusion! If the year of death RMD was not already taken by the IRA owner, it must be taken by the beneficiary. It is not paid to the IRA owner’s estate unless the estate is named as the beneficiary.
Example: Carl, age 85, dies in 2019 without taking his 2019 RMD. His son, Jaden, is his beneficiary. Jaden, as the beneficiary of Carl’s IRA, must take the 2019 RMD that Carl did not take prior to his death. The RMD should not be paid to Carl’s estate.