Is there any way to lower the MRD (minimum required distribution) this year from an inherited IRA if the value has significantly dropped since the MRD was calculated?

Asked by Erin

2 Answers

Log in or sign up with email
By submitting you agree to our Terms of Service
Answered by Dave Bradley, Investment Manager (Financial Advisor) in North Charleston, SC
Hi Erin,

First, check with your CPA and/or tax advisor. The IRS has strict rules for RMD's. Can you elaborate on how you are treating the Inherited IRA? If you are the surviving spouse who is the sole beneficiary of your deceased spouse's IRA, you may elect to be treated as the owner and not as the beneficiary. If you elect to be treated as the owner, you determine the required minimum distribution (if any) as if you were the owner beginning with the year you elect or are deemed to be the owner. There are exceptions
https://www.irs.gov/publications/p590b/ch01.html

Next, and this is very important, Why has the value significantly dropped since the RMD was calculated? As soon as you read this, call me directly to dig deeper into this.. We always want an IRA to have a positive CAGR. When was the RMD calculated?

You can also have your accountant or tax advisor sit in on the call. We need to get this taken care of.
Just click on my name for our contact information. Please mention Moneytips and that I am expecting your call.

It's not what you make, It's what you keep that determines your lifestyle | 04.26.16 @ 01:10
Comment
Log in or sign up with email
By submitting you agree to our Terms of Service
$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 06:24
Answered by David Moore, Financial Adviser in Brooklyn, NY
Hi Erin, the short answer is no.  Here’s an excerpt from the IRS describing required minimum distributions after the account owner dies.  If you do not take any distributions or if you fall short, you may have to pay a 50% excise tax on the amount not distributed as required.

Required minimum distributions after the account owner dies

For the year of the account owner’s death, use the RMD the account owner would have received. For the year following the owner’s death, the RMD will depend on the identity of the designated beneficiary.

Calculating required minimum distributions for designated beneficiaries

Beneficiaries of retirement accounts and IRAs calculate RMDs using the Single Life Table (Table I, Appendix B, Publication 590-BDistributions from Individual Retirement Arrangements (IRAs)). The table shows a life expectancy based on the beneficiary’s age. The account balance is divided by this life expectancy to determine the first RMD. The life expectancy is reduced by one for each subsequent year.

  • Spouses who are the sole designated beneficiary can:


o    treat an IRA as their own, or
o    base RMDs on their own current age,
o    base RMDs on the decedent’s age at death, reducing the distribution period by one each year, or
o    withdraw the entire account balance by the end of the 5th year following the account owner’s death, if the account owner died before the required beginning date.
o If the account owner died before the required beginning date, the surviving spouse can wait until the owner would have turned 70½ to begin receiving RMDs

  • Individual beneficiaries other than a spouse can:


o    withdraw the entire account balance by the end of the 5th year following the account owner’s death, if the account owner died before the required beginning date, or
o    calculate RMDs using the distribution period from the Single Life Table based on:
o    If the owner died after RMDs began, the longer of the:
o    beneficiary’s remaining life expectancy determined in the year following the year of the owner’s death reduced by one for each subsequent year or
o    owner’s remaining life expectancy at death, reduced by one for each subsequent year
o    If the account owner died before RMDs began, the beneficiary’s age at year-end following the year of the owner’s death, reducing the distribution period by one for each subsequent year.

See Publication 590-BDistribution from Individual Retirement Arrangements (IRAs), for details on calculating required distributions for beneficiaries. | 04.26.16 @ 13:21
Comment
Log in or sign up with email
By submitting you agree to our Terms of Service
$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 06:24
Log in or sign up with email
By submitting you agree to our Terms of Service
Free MoneyTips Membership!

Get FREE, full access to MoneyTips.com

Answered by

Related Questions

Q&A
Asked by jermaine