I thought this bit of information was worth passing on...
From Ed Slott's IRA Newsletter:
"If you are the beneficiary of a deceased IRA owner, you have to begin taking required minimum distributions (RMDs). In some cases, there is an RMD you must take in the year the IRA owner dies.
The required beginning date (RBD) for the IRA owner to have started taking their RMD is April 1 after the year they turned age 70 1/2. If the IRA owner died before their RBD, there is no year of death RMD. If the IRA owner died after the RBD, there may be an RMD that you as their beneficiary have to take that year.
Basically, when the IRA owner dies on or after that April 1 RBD, he was in pay status and should have been taking RMDs. In the year that he died, first check to see if he took his/her total annual RMD amount before death. If he/she did, you don't have to take a distribution for that year. If he/she didn't, then you as the beneficiary have to take that unpaid RMD amount.
The custodian should calculate his unpaid RMD amount in the year he died based on the age he would have been that year if he hadn't died. It's very common that there is an unpaid RMD for the IRA owner's year of death for several reasons. First, he/she may have waited until the end of the year to take the full RMD amount, or maybe he/she was taking the RMD on a monthly basis. Regardless, you are responsible.
The RMD will be taxable to you as his/her IRA beneficiary in the year you receive it. It's not taxable to him/her or his/her estate. If you, as the benefi ciary, don't take the unpaid year of death RMD, you are subject to a 50%, yes 5-0, penalty on the shortfall. This is an important and perhaps costly issue."
Comments
Hi Max,
Here's something quickly found after a search. It has a calculator that you might find helpful. There's a difference if you are a spouse vs. non-spouse as Investor mentioned. Roth IRAs follow different rules.
Inherited IRA Calculator
1) You use Table 1 - Single Life Expectancy - instead of the usual Table 3 (Uniform Life).
2) You only look up the beneficiary's lifetime once. For your own (not inherited) IRA, you look up your lifetime each year (it drops less than one year for each extra year you live). But for an inherited IRA, you decrease your life expectancy by one each year. For example, if you inherit an IRA at age 55, Table 1 says your life expectancy is 29.6. So you'd divide the IRA by 29.6 for the RMD. Next year, you'd divide by 28.6, and so on, until you get to a denominator of 1 (or less); that year you close the IRA.
There is also a 5 year option - you don't have to take anything at first, so long as you take everything within five years.
http://www.moneymanagment.info/inheritedira.htm
Here is another that is specifically discussing Inherited Roth IRA:
http://fairmark.com/rothira/inherit.htm
Kaye Thomas (Fairmark) is fantastic. IMHO, his writing is clearer, and frankly more accurate than the IRS publications (and he's the only person I would say that about).
J. Michael Hall (Moneymanagement - whose site I'm not familiar with) is okay, but somewhat less precise, and sometimes even dead wrong. The problem is that Hall is basically copying Pub 590 with edits that may change ambiguities into outright misleading statements. Here's a specific example:
There's a section in Pub 590 entitled When Must You Withdraw Assets? (Required Minimum Distributions). Within that section are several subsections, including IRA Owners, IRA Beneficiaries, and Miscellaneous Rules for Required Minimum Distributions.
That latter section reads: "More than one IRA. If you have more than one traditional IRA, you must determine a separate required minimum distribution for each IRA. However, you can total these minimum amounts and take the total from any one or more of the IRAs." You may recognize this - it's copied verbatim (including the bolding) by Mr. Hall.
The IRS should have said: If you own more than one traditional IRA, not if you have more than one IRA. You cannot aggregate the RMDs from inherited traditional IRAs and traditional IRAs you own and take the RMD from any one of the IRAs.
The actual rule is that you can aggregate the RMDs from all IRAs inherited from the same individual and take that amount from among those IRAs, but you cannot even aggregate all inherited IRAs (if you inherited different IRAs from different people).
The source of that rule is the IRS FAQ on RMDs - yes, the IRS has an official FAQ, it's in its regulations, entitled "Distribution requirements for individual retirement plans", and may be cited as 26 CFR 1.408-8. Go to Q-9. "[A]mounts in IRAs that an individual holds as a beneficiary of the same decedent ... may be aggregated, but such amounts may not be aggregated with amounts held in IRAs that the individual holds as the IRA owner or as the beneficiary of another decedent."
Unfortunately, most writers just repackage the IRS pubs, without clarifying. Kaye Thomas is special, and does a great job of explaining what the IRS really means.