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Required Minimum Distributions (RMD) After Death

October 22, 2018

IRA owners are required to begin taking Required Minimum Distributions by April 1st the year after they turn 70.5 at the latest. The RMD is calculated using the IRA balance as of the end of the prior year and an age factor that is published by the IRS.

The RMD must be made even in the year of an account owner’s death.  If the account owner dies and has not satisfied their RMD for the year, the beneficiary of the IRA must take the RMD to satisfy the requirement for the original owner.  It is common for many IRA owners to wait until year-end to satisfy their RMD. Therefore, it is important for IRA beneficiaries to be aware of their distribution requirements so that they do not fail to take the distribution in the year of death.

When the beneficiary of the IRA takes the RMD it will be taxable income to the beneficiary, not the original owner of the IRA. The RMD in the year-of-death is separate from the RMD for owners of Beneficiary IRAs in subsequent years.  Failure to satisfy the RMD could subject the beneficiary to an IRS penalty of 50% of the amount that was supposed to be distributed. Given the high penalty amount it is important that IRA beneficiaries act quickly to ensure that they are in compliance with IRS rules.