inherited IRA issue

SITUATION: Mom, age 79, died 9/18/15, naming her three children as her IRA beneficiaries. One of her children, Patrick, died 9/22/15. Patrick’s interest in Mom’s IRA fell to Patrick’s wife, Michelle. In February 2016, Wells Fargo (the custodian of the IRA) had Michelle sign a “California Affidavit of Collection of Estate Assets” in order to claim her interest in the IRA. Wells Fargo then opened an IRA account titled like this: “Michelle Gordon as Beneficiary of Decedent Beneficiary Patrick Gordon Traditional IRA.”
QUESTIONS: Did Wells Fargo do this correctly? This does have to remain as an Inherited IRA, right? Who’s life are we to calculate the RMDs on?
Thanks,



The title is fine, and this does have to remain as a non spouse inherited IRA. The IRS requires that the name of the beneficiary and the most recent deceased beneficiary be included, in no particular order. Michele became responsible for completing Mom’s 2015 RMD by 12/31/2015 if Mom did not complete it. If she did not, she can make up that RMD ASAP and file Form 5329 for 2015 requesting a penalty waiver. The IRS will most likely grant the waiver.  For 2016 and beyond, assuming that a separate inherited IRA account for Michele has been established, her RMD is calculated based on Patrick’s age he would have reached on 12/31/2016 had he lived. The divisor for 2016 is reduced by 1.0 for each successive year after 2016.



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