RMD on a Beneficiary IRA. Bene is older than deceased
What date of birth is to be used for RMD when the beneficiary(age 86) is the parent of the deceased(age 56)? Can the younger deceased date be used? Is there an option?
What date of birth is to be used for RMD when the beneficiary(age 86) is the parent of the deceased(age 56)? Can the younger deceased date be used? Is there an option?
Permalink Submitted by Alan - IRA critic on Tue, 2015-05-26 17:22
The age of the decedent can only be used if the decedent passes after the RBD. Since decedent passed at 56, the only options for the parent are either the 5 year rule or the single life expectancy of the parent which will be a little longer than 5 years.
Permalink Submitted by Donald Phillips on Tue, 2015-05-26 21:11
If death occured in 2012 and the wrong date(decedent’s instead of bene) was used to calculate the RMD, based on the inaccurate advice of the custodian. (causing the client to not take out enough) What should or can be done?
Permalink Submitted by Alan - IRA critic on Tue, 2015-05-26 22:21
All that can be done is to request a settlement of damages from the custodian, but that will be difficult to secure since these custodians have top flight legal representation. In the case of an insufficient RMD, the beneficiary can usually request a waiver of the penalty when they make up the shortfall. They would need to file a 5329 for 2013 and 2014 to request the waiver and since the IRS usually grants these by non response, they would need to request a prompt response so they could know if the waiver was granted in determining the damages against the custodian. The damages are the higher taxes due in the year of the make up distributions (2015) less the tax savings in the two prior years. Added to that would be loss of tax deferral which is a very subjective calculation and the IRA would have to be drained by around 2018 anyway.