MRD at dod - paid to estate or beneficiary?

[Guest BJW]

Our client just died in January of 2001 (he was over 70 1/2 and already taking his MRDs). He had not yet taken his MRD for the year 2001. The sole beneficiary of his IRA is his wife. Is the MRD for the year 2001 (computed based on his age I understand) an asset of hers for the year 2001 or is it paid to his estate and thus an estate asset to be reported on the estate return? Thanks for your help. BJW.

[Guest franky]

The purpose of naming a beneficiary is to know to whom the assets are payable after the IRA owner's death. Therefore, the RMD for the year of death should be paid to the beneficiary (the spouse). If the spouse disclaims the IRA, the funds would be paid to the decedent's estate, if there is no contingent beneficiary.

[BPickerCPA]

Once the decedent dies, the IRA belongs to the named beneficiary of the account. If a distribution has to be taken because the decedent was past age 70½ and had not taken the distribution prior to death, that distribution is still part of the account and is therefore still the property of the named beneficiary. It does NOT belong to the estate.

The spouse can roll over the balance of the IRA to her own IRA account, but cannot roll over the required distribution.

Barry

[Guest BJW]

Thanks for your help Franky and Barry. I have a 1041 for the estate due and thought the asset would belong to the wife but it was wonderful to have confirmation. Does anyone have a revenue ruling, private letter ruling or a code cite however? Thanks bjw:)

[BPickerCPA]

You would not have any guidance from the IRS on this, because this is not a tax law matter. The truth is, the IRS does not care who gets it as long as the recipient pays tax on it.

The issue of who it belongs to is a matter of property law which is a state issue. It's just a matter that upon death, the asset goes to the named beneficiary, if there is one.

[Mary Kay Foss]

I wanted to comment on the last line of the original post. The unpaid RMD for 2001 IS and estate asset because it is included in the IRA balance as of the date of death. However, I agree completely with everything Barry has said about the income tax treatment of it.

I only bring it up because someone called me today with the same question. They were thinking that the unpaid RMD for the year of death was an additional estate asset to be shown on the 706.