Inherited IRA and year-of-death RMD
Hello,
A client 83 years old passed away last month prior to taking her RMD. She has left the IRA to her 3 children equally. One of the kids is in the middle of a divorce and the attorney told him to not take possesion of any inheritance until after the divorce is settled. Therefore,they do not want to split the IRA account until as late as possible – waiting until the end of next year if necessary. Pershing has told us they will not distribute the year of death RMD prior to the account being split. Can the beneficiaries wait until next year to distribute the decedent’s year of death (2011) RMD if they don’t split the account until late 2012?
Thank you.
Permalink Submitted by mk foss on Mon, 2011-04-04 19:23
If they wait until 2012 to take the 2011 distribution, they will need to request a waiver of the 50% penalty. The IRS has been generous in granting the waiver when there is a good reason and the missed distribution has been taken. I don’t know if complying with a directive from one beneficiary’s divorce attorney would sound like a good excuse. I can’t understand Pershing’s reluctance to pay out the date of death RMD without splitting the IRA – it would be just an internal procedure, not an IRS requirement to treat it as they have. Maybe if they talked with someone at a higher level, they’d get a better expalnation. It’s also possible to have the funds transferred to a more cooperative custodian – I wonder if they’d release the RMD under those circumstances.
Usually you’d have these choices:
Alternative 1: The other two beneficiaries split the date of death RMD. The IRA is retitled in 2012.
Alternative 2: All 3 beneficiaries claim the date of death RMD. The IRA is retitled in 2012.
Alternative 3: The other two each take 1/3 of the date of death distribution and let the divorcing beneficiary figure out his own solution.
With a 2011 death, you have until 12/31/2012 to split into inherited IRAs but it’s easier for all involved if it can happen by 12/31/2011.
Good luck.