Furthermore, the calculation must account for the specific beneficiary; if you are using your own life expectancy, you apply your age, but if the account lists a different beneficiary, you must use that individual’s age and life expectancy factor. When aggregating multiple inherited IRAs from the same decedent, you must calculate the RMD for each account separately, but you can aggregate the totals if they share the same beneficiary and distribution timeline.
Using IRS Mortality Tables to Calculate RMD for Inherited IRAs
You must divide the account balance as of December 31 of the previous year by the distribution factor obtained from the IRS table corresponding to your age. Another frequent issue is missing the December 31 valuation date, leading to the use of incorrect market values.
It is vital to note that you should never round your age up; you must use your exact age as of your birthday in the distribution year. The account value must be determined as of the last business day of the preceding calendar year, using the closing price of the investments.
Using IRS Mortality Tables to Calculate RMD for Inherited IRAs
A common mistake is failing to reset the life expectancy factor every year, which results in using an outdated denominator. The factor derived from this table is the denominator used to calculate the annual RMD, representing the number of years over which the account value is theoretically depleted.
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