Missed Year of Death RMD from Single IRA with Multiple Beneficiaries

Litigation involving a number of adult children and stepchildren of the owner of a single IRA account, who died in 2023, are now resolving their dispute by a settlement allocating a share of the IRA to each of them.  The IRA owner had been taking RMDs but died without having taken her 2023 RMD, which still has not been distributed.

My understanding is that the 2023 RMD could have been taken by any one of the beneficiaries in the year of the IRA owner's death.  Is there any way the missed 2023 RMD can now be distributed to only one of the beneficiaries so that just one Form 5329 needs to be filed or must the 2023 RMD be allocated among all of the beneficiaries in proportion to their respective shares of the IRA to be received under the settlement and a Form 5329 be filed by each of them for a corresponding share of the 2023 RMD?

I admire your creative thinking.

Not knowing which (if any) of the children is your advisee, or whether the IRA custodian is your advisee:

Consider whether trying to do what you suggest might delay the settlement.

Consider whether trying to do what you suggest might incur expenses—including for one or more professionals’ time—disproportionate to the stakes for the settlement.

If a settlement agreement is only among the children, would it bind the United States?

Although you suppose an excise tax on not having received a 2023 minimum distribution, consider that some (or all) of the settlement’s takers might assume, each for oneself, that the individual was not a beneficiary at a relevant time or otherwise is not responsible for an excise tax.

Whether for that or another reason, an individual might file her tax returns without Form 5329. The IRS might not detect that some (or all) of the excise tax on a missed minimum distribution is not stated on Form 5329 returns.

Consider differences between 26 C.F.R. § 54.4974-1 as it applies to an individual’s tax year that began or begins on or after January 1, 2025 and, for earlier tax years, 26 C.F.R. § 54.4974-2 as published before a July 19, 2024 amendment. See https://www.ecfr.gov/current/title-26/part-54/section-54.4974-1#p-54.4974-1(h).

This is not advice to anyone.

https://stwserve.com/new-irs-regulations-on-year-of-death-rmds/

The IRS just released final regulations on this issue. Above is the article that addresses it. One individual could take the full required RMD for the original IRA owner. 

There are some issues, what if the individual who was supposed to take the full required RMD doesn't take their RMD? What if the children don't talk to each other? 

In my opinion, it would be safe for each IRA beneficiary to take their share or portion of the RMD. There's no penalty for taking amounts above and beyond the RMD for a beneficiary. 

Thanks, Peter Gulia/Bruce1, for these suggestions!

Here’s the rule Bruce1 alludes to: 26 C.F.R. § 1.401(a)(9)-5(d)(1)(i) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-5#p-1.401(a)(9)-5(d)(1)(i).

That rule applies “for purposes of determining required minimum distributions for calendar years beginning on or after January 1, 2025.”

How to interpret the rule that applied for years before 2025 is unclear.

This is not advice to anyone.