Most people in declining health want to take their RMD early in the year, so their beneficiaries do not have to worry about it if they inherit the IRA before the RMD was completed.
However, if your beneficiary is in a lower tax bracket and understands the RMD process, you might instead hold off on your RMD. Your beneficiary can then complete it at a lower tax rate, and in addition they have the choice of completing it in the current year or up to the due date for the tax return, plus any extensions. Of course, most such beneficiaries will fall under the 10 year rule and if the owner passes after RBD, the beneficiary will have to take annual RMDs in years 1-9. Therefore, the beneficiary would likely be better off completing the year of death RMD in that same year.
And if a charity is your beneficiary and you are in bad health, the charity would benefit if you did not complete your year of death RMD, as the charity would cash out the IRA tax free and that would satisfy the year of death RMD.
However, if your beneficiary is in a lower tax bracket and understands the RMD process, you might instead hold off on your RMD. Your beneficiary can then complete it at a lower tax rate, and in addition they have the choice of completing it in the current year or up to the due date for the tax return, plus any extensions. Of course, most such beneficiaries will fall under the 10 year rule and if the owner passes after RBD, the beneficiary will have to take annual RMDs in years 1-9. Therefore, the beneficiary would likely be better off completing the year of death RMD in that same year.
And if a charity is your beneficiary and you are in bad health, the charity would benefit if you did not complete your year of death RMD, as the charity would cash out the IRA tax free and that would satisfy the year of death RMD.
Statistics: Posted by Alan S. — Wed Jan 10, 2024 8:41 pm — Replies 8 — Views 652