RMDs -- Who Must Take One??

The year-end questions are starting to come in. One question that is being asked a lot is “Does my client have to take a required distribution (RMD) this year?” Here’s who must take an RMD.

All IRA owners over age 70 ½. There is no still working exception for IRA accounts. This includes SEP and SIMPLE accounts. If you are 70 ½ or older this year, you have an RMD. If this is your first distribution year, you can defer the RMD to April 1 next year but then you end up having to take a second RMD by the end of the year.

Some IRA owners who have died this year. You might be thinking if he’s dead how can he take a distribution? Death does not get you out of an RMD for the year. If the account owner had passed the April 1 of the year after turning 70 ½ (you might have to take a deep breath here and try to figure that one out but don’t blame IRS, blame Congress), then any RMD the account owner did not take must be taken by the beneficiary before year end.

All non-spouse beneficiaries when the account owner died in 2009 or earlier. This includes Roth IRA beneficiaries. Even though the account owner has no Roth RMDs, non-spouse beneficiaries do have to take them.

Spouse beneficiaries. There are special rules for spouses. Look for their options next week. (It's a tease to read next Wednesday's article!)

By IRA Technical Consultant Beverly DeVeny and Jared Trexler
------------------------------------------------------------------------------
Comment, Question, Discussion Topic on your mind? Click on the Blue Comment Link below and leave your thoughts then check back to see what other consumers and advisors think.

*Copyright 2010 Ed Slott and Company, LLC