Phew — this is complicated! The very first thing you should do is contact the custodian (hopefully its’s a large company like Fidelity) to handle this for you.
Here is the official rule for distributions. But note that is mostly applies to those who keep the money in an inherited IRA. Instead of just distributing it, the beneficiaries should have rolled it into an inherited IRA –where it could keep growing, tax-deferred, subject to the rules below.
If you inherit the IRA, you must begin taking RMDs by December 31 of the year after the year of the IRA owner’s death, based on the longer of:
- Your life expectancy, or
- The IRA owner’s remaining life expectancy.
You must take an RMD for the year of the IRA owner’s death if the owner hasn’t already taken one for that year.
If the beneficiaries simply took the money, they owe taxes on it for 2018. And each needs to seek tax advice on how much is owed. The custodian will send the IRS a form noting the payout.
The two who presumably rolled their money into an inherited IRA will follow the rules listed in italics above. Note: their first RMD will start in the year AFTER the year of death, so 2019. Again, double check with the plan custodian because they will be the ones issuing the 1099s and also the forms for RMDs to the rollover accounts.