Death of IRA holder

Client 84 passes away. Has small IRA and 401K daughter in her early 50’s is sole heir. How should the ownership be titled in a transfer of these assets, knowing she must make annual withdrawals based on life expectancy tables. Thanks



Accounts should be titled in inherited form showing the name of the decedent and the name of the daughter in no particular order. IRA custodian or 401k plan may have a preferred format supported by their processing platform. Daughter should probably have a direct transfer of the 401k made to an inherited IRA and with respect to the 401k only, she could roll it into an inherited Roth IRA if she wanted to.

My client did not receive an RMD from 1 of their IRAs in 2012.  In 2011 we/they filed paperwork for recurring annual rmd’s from this insurance company.  We had the insurance company issue rmd asap (June 2013).  Originally they said they could issue a corrected 1099 for 2012, but now say no.  They are trying leaving the penalty up to the client. Can they or can they not issue a corrected 1099?  If not, is there any other recourse in addition to requesting the IRS waive the penaly?  Thanks

  • They should not issue an amended 1099R, as the distribution must be reported in the year actually distributed. However, the chances for a penalty waiver are very good, if Form 5329 is filed with an explantion of the “reasonable cause” why the RMD was missed. Client should also send a copy of the distribution statement with the explanation, showing that the missing RMD was distributed as soon as the omission was discovered.
  • The other issue here is that the oversight has diverted taxable income in 2013 from 2012. Depending on client’s other income and deduction distribution, this could result in higher total income taxes. If enough, a request for restitution from the insurance company might be considered.

Add new comment

Log in or register to post comments