Jump to content

RMDs Multiple Beneficiaries


Recommended Posts

How do you allocate the RMD after a participant's death among multiple beneficiaries, when no beneficiary is an individual (no designated beneficiary)?  Is it proportionate?  Is there guidance?  This is an individual account plan.  

Example:

Participant P dies in 2018.  His RMD for 2018 was $200,000.  He took out $100,000 in 2018 before he died, so $100,000 remains due.  He has three beneficiaries who each receive $20,000 each and then a 4th beneficiary who will receive the rest.  Assume that, based on the total account balance, $20,000 represents 5% of the account and the amount that represents the 4th beneficiary's interest is 85% of the account.  Assume the remaining RMD of $100,000 is not paid by the end of the year. 

Would the three owe $2,500 in excise taxes (50% of 5% multiplied by $100,000) and the 4th owe $42,500? 

Link to comment
Share on other sites

Why would it not be paid by the end of 2018?

As to how to split the remaining 2018 RMD, let me make sure I understand the beneficiary designations.  Is it:  A, B and C are entitled to receive $20,000 each (i.e., like a specific dollar bequest under a will) and D is entitled to everything else?  If so, I would do it proportionately based on the entire account balance.  So, if the entire account balance is $2,000,000, A, B and C would each have 1% of the remaining RMD and D would have 97%.

 

Link to comment
Share on other sites

JPOD,

You do understand the question.  Thank your for your answer.  The approach you suggest is the same one I suggested, and is the one I think I will recommend.  I'm not positive it is the correct approach because I can't find any guidance.  As long as the IRS gets all the taxes it is owed, I don't think it would care, though the beneficiaries might.  The reason the beneficiaries would not be paid out by 2018 is because that was only a hypothetical example.  Of course, all of this will go away if the client submits this for VCP and the IRS waives the excise tax, so the question may become moot.  

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...