inherited IRA
I have a client who’s father passed away several years ago (before he was my client) and he inherited an IRA from him that is with Transamerica and in an annuity. I have checked with Transamerica and it is now an IRA-BDA for my client. However he has not taken out any distributions since he inherited it. What is the best practice for a situation like this?
Thank you.
Permalink Submitted by Alan - IRA critic on Wed, 2015-08-19 04:32
Another indication that neither IRA custodians nor the IRS are doing much to see that inherited IRA RMDs are being taken. There are some choices here, but selection of the best one depends on how many years of missed RMDs there are, and the balance in the account. Did father pass prior to his RBD or after?
Permalink Submitted by [email protected] on Wed, 2015-08-19 17:40
He was 84 years old when he passed away.
Permalink Submitted by Alan - IRA critic on Wed, 2015-08-19 19:24
The least costly way would be to calculate all the delinquent RMDs and request a distribution of the total. Remember that RMDs for 2009 were waived by Congress. Then file a 5329 with a 1040X for each year and request that the penalty be waived using the best reason possible. The IRS has waived the penalty in this situation before, but in PLR 2008-11028 the IRS allowed the life expectancy stretch for the IRA to be continued, but the taxpayer had to pay the 50% penalty. Not possible to know if the IRS would waive the penalty in this situation or not.