How to Calculate RMD in Year of Death

If an account holder passes away before taking their required minimum distribution (RMD) for the year, the responsibility shifts to the beneficiary. The IRS requires that the full RMD be withdrawn to avoid penalties, using the deceased’s age and prior-year account balance to determine the amount. Whether you’re a spouse, child or other designated heir, your next steps depend on your relationship to the original owner and the type of account inherited. Acting quickly and understanding the rules can help prevent unexpected tax consequences while keeping the inherited funds working in your favor.

A financial advisor can help you navigate the ins and outs of retirement planning so you can enter your golden years with more confidence. Connect with an advisor today.

When Do RMDs Begin?

Under the tax code, certain retirement account owners are required to begin taking minimum distributions once they turn 73 (75 for people born in 1960 or later). The types of accounts that are subject to RMDs are known as tax-deferred accounts, because money that’s contributed is not taxed immediately. RMDs typically must be taken from the following accounts:

Traditional IRAs
SEP IRAs
SIMPLE IRAs
401(k) plans
403(b) plans
457(b) plans
Profit sharing plans
Other defined contribution plans

Roth accounts, including Roth IRAs and Roth 401(k)s, are not subject to RMDs during the account owner’s lifetime. You will, however, be subject to RMDs if you inherit a Roth IRA. The IRS is very specific about when these distributions must begin. The required beginning date (RBD) for RMDs is April 1 of the year following the year that the account owner turns 73.

Understanding when RMDs begin helps explain how they apply in the case of an account owner’s passing.

When Is an RMD in Year of Death Required?

If you inherit an IRA or another tax-advantaged account that’s subject to RMDs, the timing determines whether you’re required to take an RMD in the year of death.

Here’s how it works:

You must take an RMD if the account owner has reached their required beginning date but has not taken their RMD for the year.
You do not have to take an RMD if the account owner passes away before their required beginning date.

For example, say your father turned 73 in February 2024, making his required beginning date April 1, 2025. However, he died in November 2024 without taking his RMD for the year. In that instance, you would be responsible for taking the distribution as the account beneficiary.

But what if your father passed away in January 2024 at age 72? Since he had not reached RMD age yet, you would not be obligated to take an RMD in the year of his death.

If an RMD is required in the year of the account owner’s death, the beneficiary must report the amount as taxable income on their tax return. They must pay taxes on it just as the original account owner would have, had they taken the distribution.

How to Calculate an RMD in Year of Death

If you’re required to take RMDs in the year of death after the account owner passes away, the calculation method is based on the RMD they would have received. Following IRS rules, the RMD for any year is determined by dividing the account balance at the end of the preceding calendar year by a distribution factor listed in one of the IRS’ life expectancy tables.

Which table is used to calculate an RMD depends on your relation to the deceased. The Uniform Lifetime Table is designed for unmarried IRA owners, married IRA owners whose spouses aren’t more than 10 years younger than they are and married owners whose spouses aren’t the sole beneficiaries of their IRAs. Table I (Single Life Expectancy) applies to non-spouse beneficiaries. Table II (Joint Life and Last Survivor Expectancy) is used for owners whose spouses are more than 10 years younger and the sole beneficiary of the IRA.

If the account owner named multiple beneficiaries and didn’t take their RMD, each beneficiary shares responsibility for the mandatory distribution. Beneficiaries can split the account into multiple inherited IRAs, which would allow them to claim their share of the account balance while also shouldering their part of the tax obligation.

For RMDs in the year following the account owner’s death, distribution calculations will depend on the beneficiary of the account. Generally, designated beneficiaries will use the IRS Single Life Expectancy Table to figure the distributions. This table uses life expectancy and the account balance to determine RMDs.

What If You Don’t Take an RMD in Year of Death?

Previously, the RMD for the year of death had to be withdrawn by December 31 of that same year. However, IRS guidance effective September 2024 has extended this deadline, providing more flexibility for beneficiaries.

Under the updated rules, beneficiaries now have until the later of two dates: the tax filing deadline (including extensions) for the year of the account owner’s death or December 31 of the following year. If the RMD is not taken within this window, a penalty applies. Historically, the penalty was 50% of the undistributed amount, but it has since been reduced to 25%. If corrected in a timely manner, the penalty can be further reduced to 10%.

This change allows beneficiaries additional time to assess their distribution options and avoid unnecessary tax liabilities. However, failure to take the required withdrawal within the extended period can still lead to financial consequences.

Managing an Inherited IRA

The IRS rule for the year of death RMDs is not the only tax rule to be aware of with inherited retirement accounts. You also have to be aware of your tax liability for managing the account in future years.

Spouses have several options when inheriting an IRA. They can:

Set up an inherited IRA
Put the account into their own name
Rollover the balance to another IRA

Non-spouse beneficiaries can only establish an inherited IRA. You won’t be allowed to make any new contributions to the account. You also have to fully withdraw all of the money in the account. You have 10 years following the original account owner’s death to do so. If you fail to do so, the IRS can apply a tax penalty.

In terms of how withdrawals are taxed, they follow the same tax rules as the original IRA. Withdrawals from an inherited traditional IRA are taxed as ordinary income. If you inherit a Roth IRA, RMDs are required but withdrawals are tax-free as long as the account is at least five years old.

Bottom Line

Inheriting retirement accounts can add a wrinkle to your tax situation and it’s important to be aware of the rules for the year of death RMDs. Being aware of these IRS rules can help beneficiaries avoid penalties and optimize their inheritance.

Tips for Retirement Planning

Consider talking to your financial advisor about how to handle an inherited retirement account. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
When rolling over an inherited IRA, give some thought to which brokerage you’d like to use to hold those funds. Brokerages can vary greatly in terms of the fees they charge and the range of investment options they offer. Comparing different online brokerages can help you find the best place to keep inherited retirement funds.