RMD for ineligible beneficiary
Taxpayer was killed at the age of 70 in 2020. Wife is the sole beneficiary of his IRA. However, wife is being held in jail and charged
as the responsible party to taxpayer’s death. The court has frozen all of the taxpayer’s accounts including his IRA. The custodian of taxpayer’s IRA believes the RMD can be delayed and explained away using Form 5329. I was thinking there needs to be a trust set up and the RMD paid to the trust. There would be tax due at the trust rates, so not the most economical solution. Would that idea work or is there a better way? I have not seen this situation before and any help would be appreciated.
Mark
Permalink Submitted by Alan - IRA critic on Fri, 2021-12-10 22:12
The IRS has been waiving almost all excess accumulation penalties with a properly filed 5329, some with very poor excuses for being late. In this case, with the IRA frozen, the waiver is a certainty if the 5329 is filed correctly once any late RMDs are made up. The only problem will be that all the back RMD amounts will be taxable in the year received. Also, the surviving spouse is not subject to RMDs until the year the deceased spouse would have reached 72. This responce does not consider any generally recommended procedures for handling the taxpayer’s overall final affairs or that of the surviving spouse.