Beneficiary and RMD rules

[Cynchbeast]

What are the RMD rules for non-spouse (child) rollover to inherited IRA?  His father died at about age 62, but would turn 70 1/2 in a few years.  Son and daughter are trying to get money out of plan now and this would be a consideration in the rollover.

[ETA Consulting LLC]

The 1 & 5 year rules apply.  They may take a total distribution at any time during the next five years.  If they, instead, want a lifetime payout; then they must begin receiving in the year following the year of death.  The life expectancy would be that of the oldest beneficiary (minus 1 in subsequent years)

Good Luck!

[Cynchbeast]

The participant died around 2012 so we are clearly beyond the year after death.  So if beneficiaries roll over to inherited IRA, RMD rules are based solely on their own lives - is that correct?

[Kevin C]

If the participant died in 2012, the beneficiaries are under the 5 year rule and the end of the 5 year period is 12/31/2017.  My understanding is that even if they roll to an inherited IRA, they still have to withdraw the entire balance by 12/31/2017.  You should advise them to consult with their tax adviser regarding RMDs from the IRA. 

 

If "around 2012" ends up being in 2011, the plan has an operational failure because the RMD was not paid timely.  The 50% excise can be waived through a VCP filing or possibly by the beneficiaries requesting it be waived by the IRS.

[ETA Consulting LLC]

True.  Since the 5 year rule applies, it would be redundant to roll into an inherited IRA, because they would end up having to take it right back out to meet the five year requirement.

Good Luck!