OVER 70 1/2 TAKING DISTRIBUTIONS DIES 2004- NOTHING DONE
81 year old DIES IN 2004, THREE CHILDREN 1/3 BENEFICARIES- Nothing
has been done concerning distributions. Are the beneficary’s stuck
in 2008 and forced to take a lump sum and close out the the IRA ?
Will they be forced to pay penalites for not taking an rmd in
previous years, and on what basis would they calc those rmd’s.
I assume at this point the amount can not be rolled out and rolled
into another IRA.
Thanks
Permalink Submitted by Bruce Steiner on Mon, 2008-05-19 23:09
They may still be able to stretch the IRA out over their life expectancies. See PLR 200811028.
Permalink Submitted by Alan Spross on Tue, 2008-05-20 00:22
I agree they may still be able to stretch the IRA, and perhaps even avoid paying the excess accumulation penalty as was required in PLR 200811028.
What does the IRA agreement say with respect to death post RMD? The PLR dealt with death prior to RBD when the 5 year rule election came into play, and such is not the case with an 81 year old. Since no separate accounts were apparently created, it might pay to create them now and have each beneficiary use the divisor of the oldest to make up all prior RMDs including 2004 if decedent was not current at death. They could then each file a 5329 requesting a waiver of the excess accumulation penalty for reasonable cause per p 6 of 5329 Inst. The IRS has been lenient in approving these in most cases if beneficiaries act as soon as the error is discovered. In that case, the stretch may be preserved with the only cost being a few years of RMDs bunched into one taxable year.
Of course, no rollovers are allowed, only a direct transfer if the IRA custodian is to be changed. The RMD calc should not be too difficult, only requiring the year end balances for 04 through 06 and the appropriate divisor from Pub 590, Table I.