IRA BENEFICIARY NIGHTMARE
A husband and wife (both currently under 70 1/2, but the husband will be in 2017) inherited IRA accounts from their respective mothers (both were taking RMD’s at the time of their passing). The wife’s mother passed in 2010 and the husband’s mother passed away in 2005. The adviser never informed them that they needed to take distributions and now they are trying to figure out what to do. Since the wife’s inherited IRA balance was only about $5,000, she elected to simply liquidate the entire account and will pay the taxes when she files in 2017. Will she still need to pay the 50% penalty for the previous years that she didn’t take RMD’s?
The husband’s inherited IRA, on the other hand, has about $75,000 in it. Can you weigh in on what the tax consequences will be for both?
Permalink Submitted by Bruce Steiner on Fri, 2016-09-02 19:33
Permalink Submitted by Alan - IRA critic on Fri, 2016-09-02 19:58
Permalink Submitted by Rene Nourse on Wed, 2016-09-07 01:34
The problem is that the custodian never sent annual 5498 for either accounts. Their position is that these types of accounts are non-reportable. So, it makes their situation even worse…..
Permalink Submitted by Alan - IRA critic on Wed, 2016-09-07 03:00
The custodian should have provided annual statements of the FMV of the IRAs, but it is correct that they do not have to calculate an RMD amount. Not having received more info, they might indicate as much on the 5329 penalty waiver requests.