What if A Beneficiary doesn Comply With MRD Rules?
It is a common predicament for a nonspousal beneficiary to neglect to withdraw an initial MRD by Dec. 31 of the year following the year of the account owner’s death, when the IRA owner died before the RBD and the IRA allows the life-expectancy method to be used. In some cases the beneficiary also fails to take the second MRD by the end of the subsequent year. The question that arises is whether or not it is too late for the beneficiary to remedy these missteps and remain eligible for the preferred life-expectancy method discussed above. In a March 18 IRS private letter ruling (Ltr. Rul. 200811028), the IRS allowed a nonspousal beneficiary to use the life-expectancy method after she withdrew three years’ worth of MRDs in the third year following the year of the account owner’s death, even after she paid the 50 percent penalty for failing to withdraw the year-one and year-two MRDs in those years. In this case, as in many others, the tax-deferral advantages of using the life-expectancy me
