Form 5498 in tax year of IRA owner death

Submitted by Anthony Bossuyt on Fri, 2023-07-28 13:24

Client (the mom) passed in mid 2022, age 80. Account was settled to the two beneficiaries and closed. First beneficiary is now settling the (mom’s) estate, and is asking for the 5498 from tax year 2022. Custodian informing me they do not generate a 5498 for the year in which the client died and when assets were paid out and IRA was closed. Any experience with whether this is a common practice among all IRA custodians? Does the IRS have any requirements for custodians in a situation like this?



Submitted by Alan - IRA critic on Fri, 2023-07-28 14:31

Yes, the 5498 Inst indicate that in a case like this the IRA Custodian must file a 5498 for the decedent showing the FMV on the DOD in Box 5. An alternate method is to show 0 as the end of year balance if a 5498 was issued to the beneficiary so that the same balance is not shown on both of these forms. If they use the alternate method they must inform the executor that they have the right to request a DOD valuation. I doubt that many custodians use the alternate method. Note that the DOD value is needed when the decedent had IRA basis and took a distribution in the year of death or would also be needed for estate tax purposes. If the beneficiary established a separate account, a beneficiary 5498 showing the year end FMV is also required. Sounds like this custodian may not be complying with the requirements.

Submitted by David Mertz on Fri, 2023-07-28 14:32

  • Although the instructions for Form 5498 say that the custodian “must generally file a Form 5498 and furnish an annual statement for the decedent and a Form 5498 and an annual statement for each nonspouse beneficiary” with box 5 of the decedent’s Form 5498 showing the date-of-death value, the instructions go on to say that the custodian can elect the alternative to show the year-end value in box 5 which will be zero when beneficiary IRAs have been established.  With a zero in box 5, custodians seem to infer that there is no need to issue the decedent’s Form 5498, but the instructions don’t say that.  I suspect that because in the absence of any contributions during the year the custodian is permitted to provide the owner with the year-end value on a year-end statement instead of sending the owner a Form 5498, they apply the same reasoning to a decedent and the date-of-death value.
  • The instructions for Form 5498 go on to say that if the custodian chooses the alternative to show the year-end value on the decedent’s Form 5498 instead of the date-of-death value, upon request the custodian must provide the estate with the date-of-death value.
  • I’ve never seen mention of a custodian actually issuing a Form 5498 to the decedent.  Those I’ve dealt with did not.

Submitted by Anthony Bossuyt on Fri, 2023-07-28 16:54

Sincerely appreciate the comments. Helpful feedback. 

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