RMD after Death - 4 beneficiaries

[Lou S.]

5% owner has been receiving RMDs for a number of years and dies late December 2012.

She was not married (husband pre-deceded) and her 4 childeren were each named 25% beneficiaries.

If I'm reading the 401(a)(9) regs correctly the RMD for 2013 is the single life expectancy of the oldest child.

But how does the RMD get paid? Do each receive 1/4th of the required RMD or is the RMD paid to the estate or can one receive the RMD and the others roll?

If one of the four wants a taxable distribution that is more than the RMD does that satisfy the RMD for all? That is can the other three roll over their 25% interest to inherited IRAs?

I'm sure this has come up before but I haven't seen it (or if I have it has been so long ago I forgot) and my quick search of the sub-forum did not yield any results directly on point.

[ESOP Guy]

Lou:

I was hoping someone else would answer and I am not going to be a deep well of knowledge here. Of all your questions I have only seen one of them before and this is how we decided it.

We had a person in this situation and oddly also had 4 children. We split the RMD 4 ways. Your other situations never crossed our mind- for example give one of the kids the whole RMD or if their distribution was large enough and wasn't rolled over did that cover it. I guess what I am saying is in our minds on the day of the participents death we started treated it as if we really had 4 seperate accounts that had to have the death RMD rules applied to them all. The following year the plan allowed for 100% payment to the children so it stoppped being our problem.

I can't quote you anything it seems like you haven't read like the 401(a)(9) regulations.

[masteff]

I've only ever divided the account into individual accounts so that each bene has a separate calc. But they were truly separate accounts under each bene's SSN.

If you don't split the account, then yes, use the oldest bene.

Let's make it really messy... what if one bene wants a full distribution in the form of a nonspouse rollover? Applying the full MRD to that bene would significantly reduce the rollover eligible amount. So if you applied the full MRD to that one, what if another bene asked for the same two months later? Since you applied the MRD to the first bene, the 2nd would have no MRD requirement and could rollover a larger amount than the 1st was allowed.

Individual accounts are the way to go.

[Lou S.]

Thanks masteff but to clarify we are not talking about doing the RMD on the 1st to return a from as your reply seems to suggest. I agree that would be pattently unfair. Our goal is to get all 4 withdrawal forms returned at the same time and close the account in one fell swoop by procssing the RMD and then the individual beneficiary elections immediately following the RMD.

What I was getting at though was what ESOP guy touched on in his reply, if one or more of the 4 wants a taxable distribution, then that amount is going to be a lot more than the RMD, so my question really was can the other's roll their full 25% share w/o having to assign 25% of the RMD to each of them?

And I understand getting all 4 at the same time may or may not be practical but we're trying to make it as smooth as possible. If all 4 do want to roll and that is a possibility given the size of the account, then we'll split the RMD between each of them but we'd like to avoid that if possible.

[masteff]

If you have it all in one account and if one of the 4 takes a taxable distribution, then by all means, I'd agree that you could count that as the MRD for the account.