RMDs When a Client's Estate is Their IRA Beneficiary

Whether by default or choice, a client's estate may wind up as their IRA beneficiary (as specified in the IRA documentation, the owner's estate is often the default IRA beneficiary if the owner failed to make their own choice). After the client's death, it's important to understand the RMD rules that will apply if their estate is the beneficiary. If the client died before their required beginning date (RBD, so that they were not already taking RMDs), the account must be emptied and distributed to the estate by December 31 of the year containing the five-year anniversary of the owner's death (the estate can empty the account at any point within the five-year period--no annual RMDs are required). If the client died on or after their RBD, the estate can take a lump sum distribution or can take RMDs for the ten-year period following the owner's death (distributions continue based on the deceased owner's life expectancy, reduced each year by one. For more information on the rules for identifying a designated beneficiary, visit Tax Facts Online. Read More: Link to Q3904.