Does an RMD have to be removed from a plan prior to it being rolled over to an inherited IRA (non-spouse who never hit 70.5 years)? The plan consultants sent me paperwork to have RMD taken out for 2018, as well as additional paperwork for a withdrawal/rollover.

Both forms list a $60 Third-party administrator fee so I would rather take the RMD after it is rolled over into an inherited IRA if possible (since the TPA fee is a large % of the RMD amount as is), however the plan administrator is saying that the RMD must be done before it is rolled over.

Everything I have read though seems to state that you should take the first RMD after it is rolled into an inherited IRA. Anyone know which is true?

Sorry for your loss and for not being more help with the initial fee, but my wife just moved a similar account to Vanguard. Your question made me look up their fees, which appear to be zero.Vanguard Link

As long as the deceased wasn't supposed to take a distribution by April 2019 (hit 70.5 by Dec 31, 2018), then the beneficiaries do not either. They will start the following year.

She would have turned 70.5 this fall (2018). So if I sign the paperwork with the investment firm to rollover to an Inherited IRA before the end of 2018 then the plan administrator can't take the RMD?

Most places that charge a $60 distribution fee also charge the same to rollover. It may be that RMD and rollover are both covered under the $60 fee. Basically saying you may pay a fee regardless.

I don't think there is a rule that they previous place has to send out the RMD first, but I know it is what almost all of them do because the IRS asks them to do it.

Oh I don't mind paying it once for the rollover. I just found it annoying to have to pay it twice if in fact I am not required to take an RMD in the first place.

A person does not have to make a RMD until the year after the person reaches 70 1/2. A person who receives an inherited IRA has to make an RMD in the year following the year of inheritance. So either way you look at it, you would not need to make an RMD until 2019. If the plan amount is not rolled over until 2019, then who owns the plan for 2018, the estate or the beneficiary? If the inherited IRA comes from a retirement plan like a 401(k), then you really need to make an RMD in 2019. Some retirement plans have a five-year liquidation rule that can be bypassed with an RMD in year one of an inherited IRA. Do not want to get caught up in having to liquidate in five years.

Revenuer said:

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A person does not have to make a RMD until the year after the person reaches 70 1/2. A person who receives an inherited IRA has to make an RMD in the year following the year of inheritance. So either way you look at it, you would not need to make an RMD until 2019. If the plan amount is not rolled over until 2019, then who owns the plan for 2018, the estate or the beneficiary? If the inherited IRA comes from a retirement plan like a 401(k), then you really need to make an RMD in 2019. Some retirement plans have a five-year liquidation rule that can be bypassed with an RMD in year one of an inherited IRA. Do not want to get caught up in having to liquidate in five years.

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This is incorrect.

If the original IRA owner was still living, they could delay their first RMD until April of the following year and then take another by the end of that year. OP can't extend it if the original owner is deceased. They have to file one final tax return for the deceased in 2018 and the RMD needs to be included in deceased owners income this year. Then the next year, the RMD is calculated for the new owner on the new owners table.

The RMD needs to be taken this year and done in separate transactions. No way around the TPA fee.

And for the poster talking about Vanguard having no fees; the receiving institution of the inherited IRA is not assessing this fee. The 401k plan provider is (assuming I'm reading the OP correctly).

investorAg83 said:

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Revenuer said:

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A person does not have to make a RMD until the year after the person reaches 70 1/2. A person who receives an inherited IRA has to make an RMD in the year following the year of inheritance. So either way you look at it, you would not need to make an RMD until 2019. If the plan amount is not rolled over until 2019, then who owns the plan for 2018, the estate or the beneficiary? If the inherited IRA comes from a retirement plan like a 401(k), then you really need to make an RMD in 2019. Some retirement plans have a five-year liquidation rule that can be bypassed with an RMD in year one of an inherited IRA. Do not want to get caught up in having to liquidate in five years.

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This is incorrect.

If the original IRA owner was still living, they could delay their first RMD until April of the following year and then take another by the end of that year. OP can't extend it if the original owner is deceased. They have to file one final tax return for the deceased in 2018 and the RMD needs to be included in deceased owners income this year. Then the next year, the RMD is calculated for the new owner on the new owners table.

The RMD needs to be taken this year and done in separate transactions. No way around the TPA fee.

And for the poster talking about Vanguard having no fees; the receiving institution of the inherited IRA is not assessing this fee. The 401k plan provider is (assuming I'm reading the OP correctly).

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Gonna have to agree to disagree here. Notice 2007-7 (Q/A -17) and IRC section 401(a)(9)(B)(iii) both explain than an inherited IRA by an non-spouse, where the deceased had not reached 70 1/2 and no distributions had been made, can wait until the following year to make the RMD. If the rollover is done in 2018, the inherited IRA makes the RMD based on the beneficiary's age in 2019 and thereafter. If the rollover is done in 2019, the plan needs to make a distribution before the rollover, based on the beneficiary's age. Then the inherited IRA would make RMDs annually based on beneficiary's age. Different rule if the beneficiary is a spouse.

Revenuer said:

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investorAg83 said:

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Revenuer said:

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A person does not have to make a RMD until the year after the person reaches 70 1/2. A person who receives an inherited IRA has to make an RMD in the year following the year of inheritance. So either way you look at it, you would not need to make an RMD until 2019. If the plan amount is not rolled over until 2019, then who owns the plan for 2018, the estate or the beneficiary? If the inherited IRA comes from a retirement plan like a 401(k), then you really need to make an RMD in 2019. Some retirement plans have a five-year liquidation rule that can be bypassed with an RMD in year one of an inherited IRA. Do not want to get caught up in having to liquidate in five years.

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This is incorrect.

If the original IRA owner was still living, they could delay their first RMD until April of the following year and then take another by the end of that year. OP can't extend it if the original owner is deceased. They have to file one final tax return for the deceased in 2018 and the RMD needs to be included in deceased owners income this year. Then the next year, the RMD is calculated for the new owner on the new owners table.

The RMD needs to be taken this year and done in separate transactions. No way around the TPA fee.

And for the poster talking about Vanguard having no fees; the receiving institution of the inherited IRA is not assessing this fee. The 401k plan provider is (assuming I'm reading the OP correctly).

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Gonna have to agree to disagree here. Notice 2007-7 (Q/A -17) and IRC section 401(a)(9)(B)(iii) both explain than an inherited IRA by an non-spouse, where the deceased had not reached 70 1/2 and no distributions had been made, can wait until the following year to make the RMD. If the rollover is done in 2018, the inherited IRA makes the RMD based on the beneficiary's age in 2019 and thereafter. If the rollover is done in 2019, the plan needs to make a distribution before the rollover, based on the beneficiary's age. Then the inherited IRA would make RMDs annually based on beneficiary's age. Different rule if the beneficiary is a spouse.

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Correct. But that is not the situation. They passed in the year that they turned 70.5.

Take the RMD. Roll into the bene. Take the bene rmd's in 2019 and beyond unless you need the funds for something else.

Or don't and pay a 50% penalty.