If the decedent died after their required beginning date for RMDs and did not complete their 2024 RMD, completing the decedent's 2024 RMD becomes the responsibility of the decedent's beneficiary(s). It is no longer the responsibility of the decedent, so no 2024 Form 5329 Part IX is to be filed on behalf of the decedent. The beneficiary(s) get an automatic waiver of the excess-accumulation penalty as long as they complete the 2024 RMD by the end of 2025. The distribution is taxable on the tax return for the year in which the distribution is made.
If the decedent died after their required beginning date for RMDs and did not complete their 2024 RMD, completing the decedent's 2024 RMD becomes the responsibility of the decedent's beneficiary(s). It is no longer the responsibility of the decedent, so no 2024 Form 5329 Part IX is to be filed on behalf of the decedent. The beneficiary(s) get an automatic waiver of the excess-accumulation penalty as long as they complete the 2024 RMD by the end of 2025. The distribution is taxable on the tax return for the year in which the distribution is made.
It was inherited by a non-spouse family member who subsequently took his RMD from her inherited account. He died in 2024, she inherited in 2024, he made no RMD's prior to death, she took his RMD in 2024. I think we got that part correct, but Turbotax is a little tricky with the questions for this situation. This is for his (deceased) return. I assume I just change the answer below to "yes" based on the other help I received here. Thank you to all.
@jaycook9 wrote:
It was inherited by a non-spouse family member who subsequently took his RMD from her inherited account. He died in 2024, she inherited in 2024, he made no RMD's prior to death, she took his RMD in 2024. I think we got that part correct, but Turbotax is a little tricky with the questions for this situation. This is for his (deceased) return. I assume I just change the answer below to "yes" based on the other help I received here. Thank you to all.
The key thing here is that the main reason Turbotax asks if part or all of the withdrawal is an RMD, is that there are certain things you are not allowed to do with the RMD portion of the withdrawal (like, roll it over into your own IRA). If your relative withdrew the money and spent it, I don't think it really makes a difference how you answer. (Although I stand to be corrected if necessary.)
Let me run through the scenario just in case.
1. Adam owned an IRA, was older than his beginning age, and did not make a withdrawal before his death in 2024.
2. The IRA was inherited by Betty, who did withdraw Adam's RMD, also in 2024.
3. Then Betty died, and you are working on Betty's tax return.
One detail here is that if Betty had her own, non-inherited IRA, and if Betty was older than her beginning age, her RMD on her own accounts is calculated separately from the RMD on the inherited account. They aren't combined for this purpose.
Turbotax has changed the RMD question for the worse, and there are other experts here who can help you answer to get the right result. If this was the only IRA that Betty had with an RMD requirement, then you can answer "yes", you did take all the RMDs that were required. If Betty had her own IRAs in addition and was older than her beginning age, then how you answer may need to change, and you will need to ask another expert.
Sorry if my original reply came through, making this one redundant, but I received an error message, so here we go again: Your example with "Betty" was perfect and makes this much more clear. The inheritor does indeed have a regular IRA, but doesn't have to take RMD's from it for another two years. I was wondering how to handle both at the same time, but now I know. I changed the answer to "yes", and the return processed with no errors and no 5329 was generated. Thank you again!