Failure to transer decedent’s IRA and Pension to beneficiary
IRA and pension owner died in 2002 (age 40 at death). Left IRA and company pension plan to 8 year old nephew.
The parents have never transferred either account into child’s name nor obviously made any RMD’s.
Brokerage house never caught this error either and now suggests rolling pension to decedent’s IRA and then transferring IRA (with all funds) into an Inherited IRA. Doubt the broker would sign a tax guarantee on that one.
What course of action is required now?
Permalink Submitted by Al Fry on Mon, 2007-11-05 15:18
I’d say the beneficiary is now stuck with the 5-year rule. That means both accounts would have to be emptied out and taxed by December 31, 2007. For the pension plan there may not have been any other choice, but the IRA could have been stretched, even though in 2002 some custodians were still not with the program.
Permalink Submitted by Alan Spross on Mon, 2007-11-05 19:06
I agree. Notice 2007-7 was very clear in specifying that even if the non spouse transfer is completed, the inherited IRA must retain the RMD provision of the employer plan if the plan owner passed prior to 2006.
Therefore, had the guardians acted in a timely manner in 2003, they still would probably have been stuck with the 5 year rule, but they could have spread the taxes over all 5 years. The IRA is different in that the oversight probably cost the 8 year old a great opportunity to stretch out RMDs for decades.
The kid may have grounds for legal action if the IRA is large enough to pursue that avenue.