RMD from inherited IRA but disclaimed

Submitted by Douglas Bauerband on Wed, 2016-12-14 16:49

client passed away in 2015.

two brothers took their share.

Sister disclaimed her share, which then goes to the brothers.

However, the company has not accepted the disclaimer letter yet, which means the brothers cant claim their additional shares yet.

If it goes past 2016 are the brothers going to have to pay a penalty since they should of taking the rmd for 2016 but couldn’t?

any advice?

Thank you

Douglas



Submitted by Alan - IRA critic on Wed, 2016-12-14 19:40

If the disclaimer was not recieved by the custodian within 9 months from the date of death, the disclaimer is disqualified. The brothers should take their RMDs on the portion they inherited directly and also any year of death RMD that was not completed by the client. Any of the 3 can complete the year of death RMD without compromising the disclaimer. However, taking any of the beneficiary RMD for 2016 by the sister would itself disqualify the disclaimer. The sister or her attorney should demand a decision on the disclaimer by the custodian as long as they are sure that the custodian received in within the 9 month period. At the end of the day, if the 2016 RMD is not fully completed in time, they have a reasonable cause for being late and the IRS would be very likely to waive the penalty.

Submitted by Bruce Steiner on Wed, 2016-12-14 23:32

If the disclaimer is valid, does the custodian get to “accept” it?  However, depending on state law, a letter may not be sufficient?

Submitted by William Tuttle on Thu, 2016-12-15 00:40

Alan, I saw something recently about decedent RMD + disclaimer issue. I don’t know if it was a PLR or something else. The IRS specifically allowed that taking the decedent’s RMD + disclaimer constituted a qualified disclaimer. I’m not sure if I can find it again, but I’ll try.

Submitted by Alan - IRA critic on Thu, 2016-12-15 01:12

  • spiritrider- yes it was RR 2005-36. But that is what I said whlle indicating that the sister (disclaimant) could take the decedent’s year of death RMD and the disclaimer would still be valid, but could NOT take a beneficiary RMD for any later year as that WOULD void the disclaimer.

Submitted by William Tuttle on Thu, 2016-12-15 01:21

Another case of reading something entirely different than what was actually written.

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