Inherited Profit Sharing Plan
Hello –
Client inherited a Profit Sharing Plan from his cousin (he is one of a few beneficiaries). It’s possible no RMD was taken in 2021 by the cousin (who was RMD age and passed away in June). Client had an Inherited Profit Sharing Plan established around year-end – and he did not take a pro-rata share of deceased cousin’s RMD.
1. Before transferring over the Inherited PSP into an Inherited IRA at the custodian we work with, if no RMD was taken for 2021, I assume the client should take what the 2021 RMD was (his portion) before doing a trustee-to-trustee transfer into a new Inherited IRA that we manage – and submit Form 5329 along w/ a letter explaining why the RMD wasn’t taken. Correct?
2. Also, if the client wishes to partially convert the Inherited Qualified Plan (PSP) into a Roth IRA, is there a time limit for doing so? Confirming that we may establish an Inherited Roth IRA at the custodian we use (along w/ an Inherited Traditional IRA) and have whatever portion of the Inherited Qual. Plan that the client wishes to convert be directed, on a trustee-to-trustee basis, directly into this Inherited Roth IRA, w/ the balance into the Inherited Trad. IRA?
Thanks.
Jason
Permalink Submitted by Alan - IRA critic on Mon, 2022-03-07 15:05
The profit sharing plan administrator should have required that the year of death RMD be completed in 2021 unless it was not practicable due to beneficiary documentation delays. You are correct regarding the 5329 filing. The proposed new Regs eliminate that 5329 filing requirement for years of deaths after 2021, but this death was in 2021. There is no time limit for direct rollovers to be completed for the beneficiary including a split to inherited TIRA and inherited Roth IRA, but after the end of the year following the year of death, such direct rollovers could be impacted by certain plan specific deadlines, such as limitation to either the 5 year rule or 10 year rule. Best to complete these before the end of that second year.