The Beneficiary Takes the Year of Death Distribution

The IRS rules are not concerned with who takes it, but rather when it is taken. However, due to the confusion on this point, the Final Regulations (and Revenue Ruling 2005-36;June 27, 2005) confirm that the named beneficiary must take any required distribution not taken by the IRA owner in the year of death. It is not paid to the estate, unless the estateis the beneficiary.

In public conferences, IRS rule writers have stated this position as well, even though the question of WHO takes the required distribution is beyond the scope of the IRS withdrawal rules. Under state law, the minute the IRA owner dies, the balance in the IRA belongs to the beneficiary, NOT the estate. The estate could have different beneficiaries than those listed on the IRA beneficiary designation form.

The fact that the beneficiary does not have to withdraw the entire account the minuteafter the IRA owner dies does not make the account any less his. The beneficiary willalso pay the tax on the distribution. It will be reported on the beneficiary’s personal tax return (Form 1040), NOT on Form 1041, (the estate’s income tax return).

IRS Revenue Ruling 2005-36
June 27, 2005
IRS Says Beneficiary Can Disclaim After Taking RMD

The year of death RMD must be taken by the beneficiary.