Excise taxes on missed or incorrect IRA RMDs for decedents’ estates and beneficiaries

Key Findings

• Financial Impact: 25% excise tax on each missed RMD amount per year (e.g., $2,500 penalty on a $10,000 missed RMD; multi‑year failures can easily reach tens of thousands of dollars across accounts and beneficiaries)
• Frequency: Annually (each year an estate or beneficiary misses or under‑takes an IRA RMD)
• Root Cause: Complex and frequently changing RMD rules (including SECURE Act and SECURE 2.0 age and beneficiary changes), combined with fragmented recordkeeping when a decedent held multiple IRAs and custodians, cause executors and trustees to misidentify or overlook the correct RMDs. IRS guidance notes that when RMDs are not paid timely, participants/beneficiaries owe an excise tax under IRC §4974, historically 50% and now 25% for 2023+ RMDs, reduced to 10% if corrected promptly.[2][3][6][7][8] Estate professionals often assume custodians are responsible for enforcing RMDs, but industry guidance clarifies that IRA owners and beneficiaries—not custodians—bear responsibility, so operational misses in the estate administration process directly hit the estate/beneficiaries with penalties.[3]