RMD and inherited ira
client, over age 70 1/2, died in 2007 without satisfying his RMD. his account has since been transferred to his 4 children as beneficiary IRA’s. will the IRS penalize deceased client’s estate for not taking his full RMD? Are his children responsible for taking a distribution from their inherited IRA in 2008 to satisfy their fathers RMD? what are children’s options?
Permalink Submitted by Al Fry on Thu, 2008-01-03 22:41
The children need to get Dad’s RMD out ASAP, and file a 5329 to calculate the penalty then ask for a waiver. It can come out of one or all of the inherited IRAs. The estate would not pay the penalty anyway, unless it was the beneficiary. The RMD (and resulting penalty) inures to the bene(s) of the IRA.
Permalink Submitted by Denise Appleby on Fri, 2008-01-04 00:36
[i]For the benefit of any reader who may be new to RMDs[/i]…We are assuming that by [b]“over age 70 ½”, [/b]you mean he reached age 70 ½ before this year…Since he could have reached age 70 ½ this year, and died after, but no RMD would apply in such a case, as he would have died before the [url=http://retirementdictionary.com/Required-minimum-distribution.htm%5DRBD%5B/url%5D
Permalink Submitted by mark gregoreski on Thu, 2008-03-13 13:21
do children file form 5329, or father’s estate? and is this filed for tax year 2007 or 2008?
Permalink Submitted by Alan Spross on Thu, 2008-03-13 18:20
The executor should file it on taxpayer’s final return for 2007, although it would probably still be recognized if the beneficiaries filed it on their returns. Either way, the evidence that the shortfall has been distributed should be included. Death is automatically deemed a “reasonable cause”.