# Calculating RMDs for Various IRA Beneficiaries

There are a few different ways that Required Minimum Distributions are calculated for beneficiaries of IRAs.  The two primary determining factors are:

1. Is the beneficiary the spouse of the original owner? and
2. Did the original owner attain age 70½ prior to death?

There are two more factors that also have an impact on the nature of the calculations, although the impact is different:

1. Is there more than one beneficiary? and
2. Is the beneficiary a person or an entity, such as a trust, a charity or the estate of the original owner?
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### Spouse

If the beneficiary is the spouse of the original owner of the account, and the original owner died before age 70½, then the rule is that no RMDs are required until the owner would have reached age 70½.  At that time the beneficiary will use the Single Life table to calculate the distribution amount based upon his or her own attained age.  In each subsequent year, the spouse beneficiary will recalculate the RMD using the Single Life table and the currently-attained age.  In this manner, the RMDs will stretch out over the lifetime of the beneficiary spouse.  (We’ll refer to this as Method A.)

Now, if the owner died after attaining age 70½, first of all, in the year of the owner’s death, a regular RMD is required using the Uniform Life table and the decedent’s attained age (if the deceased owner hasn’t already taken it).  For the next and subsequent years, RMDs are based on the lesser of 1) the amount calculated by using the beneficiary spouse’s attained age with the Single Life table; or 2) the amount calculated using the deceased owner’s age with the Single Life table.  If the second factor results in the longer distribution period, then each subsequent year the initial factor is reduced by 1, rather than re-calculating based upon a new factor from the table based on that year’s attained age. (Method B)

In addition to the two above scenarios, a spouse beneficiary has the unique ability to rollover the IRA into an account in his or her own name, and to treat the IRA as such.  Only a spouse beneficiary has this option.  If the original owner had already reached age 70½, RMDs must continue but they are based upon the surviving spouse’s attained age using the Uniform Lifetime table.

### Non-spouse (sole beneficiary)

If there is a sole, non-spouse beneficiary and the owner has not reached age 70½, the RMDs must begin in the year following the year of the original owner’s death.  The RMD is calculated based upon the beneficiary’s attained age using the Single Life table for the first year, and the factor from the table is reduced by 1 for every subsequent year. (Method C)

The only difference if the owner was at least age 70½ is that in the year of the original owner’s death the RMD must be made for that year (if the deceased owner hasn’t already taken it).  Thereafter, RMDs for the beneficiary are calculated using Method C.

### Non-spouse (multiple beneficiaries)

If there is more than one beneficiary of the account, there is one activity that could take place which will change the outcome of the distribution calculations.  If the account is divided into separate accounts for each beneficiary by the end of the calendar year following the year of the death of the original owner, then each non-spouse beneficiary will be able to treat the distributions just the same as was explained above for sole non-spouse beneficiaries (Method C).  The same is true if one of the beneficiaries is a spouse – this beneficiary can use the rules for a spouse beneficiary (outlined above, Method A or Method B).

If the account is not divided into separate accounts as described above, RMDs are calculated based upon the oldest beneficiary’s attained age as if the oldest beneficiary is a sole beneficiary.  Then each subsequent distribution is divided up based upon the nature of the beneficiary designations to each beneficiary. (Method D)

### See-through Trust

If the beneficiary of the account is a see-through trust designed to create a single source of funds for multiple beneficiaries, then Method D is used. On the other hand, if the see-through trust has separate sub-trusts for each beneficiary, then each beneficiary’s RMD is calculated using Method C.

### Non-Qualified Trust

If the beneficiary of the account is not qualified as a see-through trust, typically because one or more of the beneficiaries is not a person, if the original owner had not reached age 70½ then the entire account must be distributed within five years of the death of the original owner. (Method E)

If the original owner was at least age 70½, then the regular RMD must be made for that year (if the deceased owner hasn’t already taken it).  Then for subsequent years, RMDs are calculated using Method C.

It should be noted that a non-qualified trust could become qualified as a see-through trust if the non-individual (entity-type) beneficiary’s portion is cashed out of the account.  If this is possible, then the trust is treated as a See-Through trust and RMDs are calculated as describe in that paragraph above.

### Charity

If the beneficiary is a charity, distributions are handled exactly the same as the non-qualified trust, using Method E or Method C, depending on the age of the original owner.  The difference is that these are the only options available to the charity.

### Estate

The estate as the beneficiary uses the same methodology as a charity.

1. Robert Hardekopf says:

Are there any circumstances where the non-spouse beneficiaries of the IRA owner (who is already taking RMDs) can use the Single-Life table each year (Method A) instead of just the first year and subtracting 1 for each subsequent year (Method C)? In other words, if a spouse beneficiary can use Method A, why not children?

1. jblankenship says:

Unfortunately, the non-spouse beneficiary is always treated differently from a spouse beneficiary. As such, in your example, children as beneficiaries must use Method C. And the answer as to “why” – that’s the way the rules are written. I don’t have insight into exactly why the rules were written that way.

jb

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3. joe says:

Hi Jim,

Nice piece. Very underdstandable.

If you don’t mind, I would like to point out two differences I see.. If a surviving spouse waits until they are 70 1/2 to take RMDs, that implies they re-titled or rolled the account into their own name as an owner, which would allow them to use the Uniform Lifetime Table, not the Single Life Table.

When the spouse uses the Single Life Table (keeping the IRA as an inherited IRA), they are allowed to use the recalculation method, not the fixed-term method, unlike the non-spouse beneficiaries.

I think this is well written, the content is very diffficult to explain to people.

Feel free to email me back if you want.

1. jblankenship says:

Thanks for the pointers, Joe. As you say, it’s a complex area of the rules and as such it’s difficult to get all the the nuances straight for all circumstances. I appreciate your taking the time to respond.

jb