Beneficiary Required Minimum Distributions Calculator

What are the regular payments you have to take from your inheritance?

When a loved one passes on it can be a confusing and challenging time. Beyond the pain of loss is the weight of financial obligations. Though receiving a qualified savings account can be a blessing, it comes with many difficult decisions. Initially, you will have to decide what to do with the money you received. With only a few options, most beneficiaries choose to take yearly payments (RMDs). With RMDs, you’ll have to begin making withdrawals and meeting deadlines, even though you may still be reeling from your loss. To prepare for the payments, you'll have to take, start by adding the account details to the calculator. The system is designed to IRS guidelines, so you can feel confident forecasting your financial duties.

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What are required minimum distributions?

When an individual contributes to a retirement plan, like a 401k or IRA, they can grow tax-deferred money for their retirement. However, the money cannot remain in the account indefinitely. The IRS requires all account holders to begin taking yearly payments from those savings once they turn 70 ½ years old.

That annual withdrawal is called a required minimum distribution (RMD). Through RMDs, the government can recapture tax revenue from deferred contribution plans.

As you already know, life can be unpredictable, and the account owner may eventually pass away. The money from the account can be designated to another person (the beneficiary) upon the owner’s death. The beneficiary can typically be any person or entity, as long as it is correctly documented. In most cases, the person receiving the inheritance will have to take required minimum distributions upon receiving the funds.

Do RMDs apply to me?

If you recently received an inheritance, RMDs might apply to you. Typically, these distributions are mandatory for most retirement plans, ROTH savings included:

Traditional IRA
SEP & simple IRA
All ROTH contribution plans
RMDs are intended to exhaust the funds in the account so that tax-deferred (or tax-free for ROTH) savings don’t last forever. For that reason, making any mistakes on your draws can be very costly. Withdrawing less than your RMD amount (or missing the draw entirely) can result in a hefty 50% penalty tax on the difference.
In the following sections, we’ll take a closer look at all the options for spouses and non-spousal beneficiaries of retirement savings accounts.
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Spousal beneficiaries

If you are the wife or husband of an IRA owner (or other retirement savings) who has named you as their beneficiary, it’s vital that you learn the rules imposed on inheritances. You’ll generally have the option to transfer the money to a qualified account, start taking RMDs, or redeem the entire balance. However, the age of the decedent will determine the exact options available to you.

When the account owner passes on or after the age of 70 ½, you have three choices:

● Take RMDs based on the account owners age now
● Take RMDs based on your age now
● Treat it as your own IRA and postpone RMDs until you turn 70 ½
When the account owner passes before the age of 70 ½, the options change slightly:
● Postpone RMDs until the account owner would have turned 70 ½
● Take RMDs based on your age now
● Treat it as your own IRA and postpone RMDs until you turn 70 ½
● Redeem the entire balance by the end of 5 years (following the account owner’s death)
Your age,tax situation, and your income needs should define the best course of action for you. To learn how RMDs are calculated skip to the last section, How is the RMD amount calculated?
Or just add the account details to the calculator.
Non-spousal beneficiaries

If you are the brother, sister, son, daughter, cousin, or friend of an IRA owner who has named you as their beneficiary, it’s crucial to become familiar with the law imposed on inheritances. In most cases, you’ll have to start taking distributions immediately. Ultimately, the age of the account owner will dictate what actions you can take.

When the account owner passes after the age of 70 ½, you only have one option:

● Take RMDs based on your age
When the account owner passes before the age of 70 ½, the choices change slightly:
● Redeem the entire balance by the end of 5 years (following the account owner’s death)
● Take RMDs based on your age
Your decision to take RMDs or the entire balance should be based on your financial needs and the tax implications of the additional income. Any earnings from a deferred contribution plan are subject to ordinary taxes.
Keep in mind. As an individual beneficiary, you have to be careful about transferring the account to your name. If you put the account in your name, it will be immediately considered a lump-sum distribution. If you intended to take RMDs, you might not be able to reverse the error. For RMDs, the account title should have the owner’s name, date of death, followed by your name as the beneficiary.
How is the RMD amount calculated?
For the year of the account owner’s death, you can use the RMD they would have received. For the following years, the RMD should be adjusted to the age of the beneficiary and has to be drawn before December 31st.
It's relatively straightforward to calculate your payments. To do this, you'll need to use the IRS single life table (Pub 590-B, Appendix B) and the balance of your inheritance. The table will provide you with a life expectancy based on your age.
Divide the account balance by your life expectancy to get your first RMD. If there are multiple beneficiaries of one account, use the life expectancy of the oldest beneficiary. Then, reduce life expectancy by one factor every following year that payments have to be withdrawn.
Alternatively, you can add your information to the calculator. The system will model your annual payments and the remaining balance after each RMD.