July 12, 2021 at 8:12 pm #65584
This topic came up in a discussion the other day. I think I know the answer to this, but thought I’d ask to be sure.
let’s say Joan, a widow, will be age 72 in 2022 and elected to delay her first RMD to January 2023, but then suddenly dies February 2023. Because she did not have an RMD due to her death prior to her RBD, can the estate ask the IRA custodian to return the withdrawal to the IRA if within 60 days of the withdrawal? Joan has no other IRA rollovers in the preceding 12 months.
My guess is no, as the owner of the IRA is no longer living
BruceMJuly 13, 2021 at 12:47 am #65585
Bruce, you are correct, but for a different reason. Rev Proc 2003-16 authorizes an executor to roll over a distribution made to the decedent if the estate is the beneficiary, and under current procedures, the 60 day deadline could also be waived due to the death of the IRA owner.
However, in this case, the distribution was an RMD and an RMD can never be rolled over, so the answer is no, but not because the owner is now deceased.
For beneficiary RMD requirements Joan did pass prior to her RBD, and if her estate was the beneficiary the 5 year rule will apply.July 13, 2021 at 4:13 pm #65588
I understand what you are saying, but the central point here is there was no RMD, as death occurred prior to the RBD….correct? Had Joan been living then yes, she could not rollover her withdrawal as it was equal to or less than that year’s RMD amount. But in death, because she had not attained her RBD then there would be no RMD. Put another way, let’s say Joan died having made no TIRA withdrawals in the year she attained age 72 or up to the date she died the next year. The estate would not be required to withdraw the RMD amount by her RBD…correct? Hence, no RMD?
BruceMJuly 13, 2021 at 8:36 pm #65590
Her death prior to RBD would have cancelled the need for an RMD for the first and second RMD distribution years, but only if Joan did not take a distribution before passing. But since Joan did take a distribution in an RMD distribution year, that was an RMD and her death does not change the status of her distribution, which must still be treated as an RMD. However, if Joan passed prior to her RBD, there would be no RMD requirement of the beneficiary (individual or estate) for the year of death.
So if Joan passed without taking a distribution in 2022 or in 2023 prior to RBD, the RMDs for those years are forgiven and the beneficiary is not required to take an RMD for either year. The first beneficiary RMD for the estate (in this case) would be in 2028 to drain the inherited IRA under the 5 year rule. Again, any distribution she did take in those years while living was an RMD and her death does not change the status of these distributions from RMDs to non RMDs. Her death before her RBD changes the requirements of her beneficiary and the fact that she took distributions before death that were RMD does not change the fact that she passed prior to her RBD.
Back in 1999, Natalie Choate called these years the “MRD Limbo Period” in this article: https://secureservercdn.net/184.108.40.206/741.9f4.myftpupload.com/wp-content/uploads/2015/03/CNotesV1N1.pdfJuly 13, 2021 at 10:42 pm #65591
Thanks for the detailed explanation Alan. What you say makes perfect sense.
BruceMJuly 27, 2021 at 9:44 am #65687RonaldMunozParticipant
If you took RMD at the end of this summer, you may be able to return the funds. In this case, you should do what is known as the 60-day transfer to reverse the withdrawal. That is, return the money to the IRA within 60 days of taking over the distribution.
From Assignment writing service UKJuly 27, 2021 at 4:47 pm #65689
Not correct. An RMD can not be rolled over. If it rolled over nonetheless, it will create an excess contribution to the account receiving the rollover.
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