inherited IRA for a person under age 70&1/2 when they died.
My client inherited an ira from her partner (non spouse) who died at age 41. She died in 2006 she has not taken any RMD. Should she have taken RMD’s each year and is so what is the way to deal with this? I have in the past had a new client who parents had not taken thier RMD’s and passed away we calculated them and took them and filed the form with the IRS asking for a waiver and we where successful in getting it. Would this be handled like that or is there other issues that i need to know? My client is now age 61.
Permalink Submitted by Alan - IRA critic on Wed, 2014-12-17 20:29
Yes, life expectancy RMDs should have started by 12/31/2007. Chances are good that client could restore the life expectancy stretch by making up all the late RMDs (2007-2014 excluding 2009 which was waived). The main issue with that is whether the IRS will waive the 50% penalties if client files a 5329 for each year requesting the penalty be waived for reasonable cause. At this late date even if client opted for the 5 year rule, the IRA would have had to be drained by 12/31/2012 to avoid the penalty, so it is better to attempt to restore the stretch and get the lower amount of penalties waived. Of course, to reconstruct the life expectancy RMDs, the year end value of the IRA would need to be known each year. Divisor would based on client’s age on 12/31/2007 and that divisor would be reduced by 1.0 for each subsequent year. 2009 RMD was waived, but divisor for 2010 would be 2.0 less than the divisor for 2008.