When an IRA owner dies without having taken that year’s required minimum distribution, the beneficiary has to withdraw the missing amount by December 31 of the year of death. An RMD not taken in the year of death triggers a 25% excise tax on the shortfall, though the penalty drops to 10% if you correct it within the IRS’s window and can be waived entirely for reasonable cause. The first thing to sort out is whether a year-of-death RMD applies at all, because plenty of deaths don’t create one.
When a Year-of-Death RMD Exists
The obligation only exists if the owner died on or after their required beginning date. That date is April 1 of the year after the owner turns 73. For people born in 1960 or later, the trigger age rises to 75 starting in 2033. If the owner died before hitting that milestone, there is no year-of-death RMD to worry about, and the beneficiary moves directly to the post-death distribution rules for inherited IRAs.1Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs)
A concrete example: a 68-year-old who dies in June leaves no RMD shortfall behind, because they hadn’t reached their required beginning date. A 78-year-old who dies in June without having taken their full annual distribution leaves the remainder for the beneficiary to withdraw by December 31.
Roth IRAs Don’t Have This Problem
Roth IRAs carry no required minimum distributions during the owner’s lifetime, so there is never a year-of-death RMD for a Roth, regardless of the owner’s age at death.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Roth beneficiaries have their own distribution timeline going forward, but the specific issue in this article does not apply.
Figuring Out What Still Has to Come Out
The year-of-death RMD is calculated as if the owner had lived the entire year. Take the account balance from December 31 of the prior year and divide it by the life expectancy factor from the IRS Uniform Lifetime Table.3Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) If the sole beneficiary was a spouse more than 10 years younger than the owner, the Joint Life and Last Survivor Expectancy Table applies instead.
Only the untaken portion is the beneficiary’s problem. If the calculated RMD for the year was $15,000 and the owner had already withdrawn $5,000 before dying, the remaining obligation is $10,000. Changes in account value after the date of death don’t move the number. The calculation is locked in at the start of the year.
More Than One IRA
When the deceased owned multiple traditional IRAs, a separate RMD is calculated for each one. The beneficiary can add the amounts together and pull the total from any one or more of the inherited IRAs, as long as all of them came from the same decedent.1Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs) This aggregation rule is limited to traditional IRAs. Employer plans like 401(k)s must each have their own RMD taken from that specific plan.
Who Takes It, and When
The obligation belongs to whoever inherits the account. A named beneficiary takes the withdrawal and reports it as income. If the estate is the beneficiary, the executor handles it. With multiple beneficiaries, each person’s share of the RMD matches their share of the account, so two 50% beneficiaries would each cover half.
The deadline is December 31 of the year the owner died.1Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs) There is no automatic extension when death happens late in the year. A beneficiary whose parent dies in November may have only a few weeks to identify the shortfall and get the money out. The IRS does not add time because the calendar is tight, but the penalty relief described below is designed for exactly that pressure.
The distribution is ordinary income to the recipient, taxed at their marginal rate. It cannot be rolled over into another retirement account, because RMDs are ineligible for rollover.
The 25% Penalty and How to Reduce It
If the year-of-death RMD does not come out by December 31, the IRS imposes a 25% excise tax on the shortfall.4Office of the Law Revision Counsel. 26 U.S. Code 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans On a $10,000 shortfall, that’s $2,500 on top of the income tax the beneficiary will owe on the distribution itself once it’s taken.
SECURE 2.0 dropped this penalty from the previous 50% for tax years beginning after December 29, 2022. The same law added a further reduction: if the beneficiary withdraws the missed amount and files during the correction window, the rate falls to 10%.4Office of the Law Revision Counsel. 26 U.S. Code 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans The window runs from the date the tax is imposed until the earliest of three events: the IRS mails a notice of deficiency, the IRS assesses the tax, or the last day of the second tax year after the penalty year. In practice, that gives most people roughly two years.
Requesting a Full Waiver
The IRS can waive the penalty entirely if the shortfall was due to reasonable error and the beneficiary has taken steps to fix it. You request the waiver by filing Form 5329 with your tax return and attaching a letter explaining what happened.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs The IRS grants these waivers regularly when the explanation is straightforward. A beneficiary who didn’t know about the year-of-death obligation and withdrew the amount as soon as they learned about it has a strong case. Take the corrective distribution before filing the waiver request, not after.
How the Distribution Gets Reported
The IRA custodian issues Form 1099-R to whoever received the money. The gross distribution appears in Box 1, the taxable amount in Box 2a, and Box 7 carries distribution code 4, identifying the payment as a death distribution.5Internal Revenue Service. Instructions for Forms 1099-R and 5498 Code 4 exempts the distribution from the 10% early withdrawal penalty regardless of the beneficiary’s age.6Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
The recipient reports the taxable amount on their Form 1040 for the year they actually received the distribution. If the excise tax applies because the RMD was late, Form 5329 is filed alongside the return for the year the RMD was originally due, whether the beneficiary is paying the tax, claiming the 10% corrected rate, or asking for a waiver.
One tax benefit worth flagging: when estate tax was paid on the IRA, the beneficiary may qualify for an income tax deduction under the income in respect of a decedent rules. That deduction offsets the double-taxation effect of paying both estate tax and income tax on the same retirement assets. The calculation depends on the proportion of IRD included in the taxable estate, and this is a situation where a tax professional generally pays for itself.