RDM after Death with Estate as Beneficiary

[Guest peebee]

I'm curious to know if an Executor has to take a RMD prior to placing IRA assets into the estate account. In this instance, the deceased named his beneficiary as his estate but then specified that 100% of his IRA go to specific charities. He died in January, 2012 and hadn't taken a RMD for the year. Clearly the easier route would have been to name the charities directly as beneficiaries and have them deal with the RMD.

I assume the IRS wants the RMD in the year of death, the question is how and when. Should the RMD be taken prior to or after assets are placed into the estate account? Are there tax consequences either way?

[mbozek]

I'm curious to know if an Executor has to take a RMD prior to placing IRA assets into the estate account. In this instance, the deceased named his beneficiary as his estate but then specified that 100% of his IRA go to specific charities. He died in January, 2012 and hadn't taken a RMD for the year. Clearly the easier route would have been to name the charities directly as beneficiaries and have them deal with the RMD.

I assume the IRS wants the RMD in the year of death, the question is how and when. Should the RMD be taken prior to or after assets are placed into the estate account? Are there tax consequences either way?

General rule is that if the IRA owner dies before taking an MRD then the bene designated under the IRA must receive the MRD by 12/31 of year of death.

Did the IRA owner designate his estate as the bene of his IRA and then the estate will distribute the IRA funds to charities named in his will?

[Guest peebee]

Yes, the IRA owner designated his estate as beneficiary of his IRA. So the estate will distribute the IRA funds to the names charities. Does the MRD have to be taken before going into the estate account or will the charities get the full amount in the IRA? What are the tax implications to the estate?

[mbozek]

Yes, the IRA owner designated his estate as beneficiary of his IRA. So the estate will distribute the IRA funds to the names charities. Does the MRD have to be taken before going into the estate account or will the charities get the full amount in the IRA? What are the tax implications to the estate?

If the entire balance of the IRA is distributed to the estate by 12/31 the MRD distribution will be satisfied. IRA funds will be taxable income to the estate. However, Estate will deduct the distribution of the IRA funds to the charities which will 0 out the income received by the estate. Estate needs to consult with tax advisor on how to avoid taxation on the IRA funds.