Handling RMDs from Inherited Self-Directed IRA with Real Estate - LLC Ownership Complications

This is a tricky situation with the mixed ownership structure. The custodian is likely saying both IRAs need to take distributions because the LLC is a single entity, and partial distributions from just one owner might create operational complications. Here are some options to consider: First, you could have the LLC distribute income rather than equity to satisfy the RMD from the inherited SDIRA. If the property generates rental income, you could take that as your RMD without disturbing the ownership percentages. Another option is to refinance the property and use the cash proceeds to satisfy the RMD requirement for the inherited SDIRA. This would allow you to take cash rather than a portion of the property. You could also explore selling the property entirely and reinvesting the proceeds into separate investments for each IRA, which would solve the distribution problem going forward but obviously comes with transaction costs. Finally, yes, you could consider taking the 25% penalty if the numbers work out better than taking an early distribution from your traditional IRA with the additional 10% penalty plus taxes.

After struggling with my own inherited SDIRA that held real estate, I found an incredible resource that helped me understand all the complex rules and options. I used https://taxr.ai to analyze my situation and get personalized guidance for my required distributions. They have specialists who understand the nuances of these complex scenarios. The platform analyzed my situation with mixed ownership entities and showed me how to properly structure my RMDs to avoid unnecessary penalties. Their analysis even pointed out a distribution strategy I hadn't considered that saved me from making a costly mistake with my property distributions.

I was skeptical at first, but I tried https://taxr.ai for my inherited SDIRA that held a 50% interest in a multi-unit property (with the other 50% owned by my regular Roth). Their analysis saved me thousands! They identified that my custodian was incorrectly calculating my RMDs based on the entire property value rather than just my inherited portion. They provided documentation explaining exactly how to calculate the correct RMD amount and which IRS regulations applied to my specific scenario. Their specialists even drafted a letter I could send to my custodian explaining why their interpretation was incorrect. What impressed me most was how they understood the specific nuances of real estate in SDIRAs - something my regular accountant had no experience with. They guided me through taking an in-kind distribution that satisfied the RMD requirements without forcing me to sell or divide the property inappropriately.

After spending THREE WEEKS trying to reach the IRS for guidance on my inherited SDIRA with real estate, I found https://claimyr.com and was connected to an actual IRS agent in less than 45 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c I explained my complex situation with mixed ownership between different IRA types, and the agent clarified that my custodian was misinterpreting the rules. They confirmed that while the inherited IRA needs to take RMDs, there's no requirement that would force distributions from both accounts just because they share ownership in an LLC. Getting official IRS guidance gave me the confidence to push back on my custodian's interpretation. They eventually agreed to process just the inherited IRA distribution after I provided the documentation from my IRS call.

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Has anyone considered using a 1035 exchange to move the inherited SDIRA to a different custodian that might have more experience with these complex situations? I was in a similar situation last year with an inherited SDIRA that owned a rental property and found that changing custodians solved the problem. The new custodian had more experience with alternative assets and understood how to properly handle the RMD requirements without disturbing the ownership structure.

Have you considered restructuring the LLC ownership? Maybe you could split it into two classes of membership interests with different distribution rights? That way, the inherited SDIRA could take distributions to satisfy RMDs while the traditional IRA maintains its undisturbed interest.

I went through a very similar situation with my inherited SDIRA that held commercial real estate through an LLC structure. My custodian initially gave me the same confusing guidance about both accounts needing distributions. What ultimately resolved it for me was getting a second opinion from a fee-only financial advisor who specializes in self-directed IRAs. They explained that custodians often take overly conservative interpretations to avoid liability, but the actual IRS regulations don't require what mine was saying. The key insight was that each IRA maintains its separate tax identity even when they co-own assets through an LLC. The inherited SDIRA has RMD requirements, but that doesn't automatically trigger distribution requirements for your traditional IRA just because they share ownership. I ended up having the LLC make a special distribution to only the inherited SDIRA to satisfy the RMD requirement. This required amending the LLC operating agreement to allow for disproportionate distributions, but it solved the problem without forcing my traditional IRA to take an early distribution. Before making any moves though, I'd strongly recommend getting documentation from a qualified professional about the correct interpretation of the rules. Custodians will often change their position when presented with proper legal authority, but they won't budge on verbal explanations alone.