Inherited IRA, Non Spouse, Missed RMD’s

I’m trying to assist a pro bono client who’s mother died in 2003 leaving her a one third share of nine IRA’s. The client has issues that prevented her from transferring her share of her deceased mother’s IRA’s into an Inherited IRA in her name. She also has not taken any RMD’s from these accounts.

I’m currently completing the paperwork for her inherited IRA and I wanted to confirm that she will still be able to take future distributions based on her life expectancy. I’m going to try to enlist the aid of a tax professional on the missed RMD’s and penalties.



Note the following article by Ed summing up the issues resulting from PLR 2008 11028, which is timely in your case if her mother died prior to her RBD.

http://www.financial-planning.com/asset/article/613061/saving-stretch.html

The ruling protects her ability to use life expectancy distributions, however she will also have to pay several years of excess accumulation penalties. There is no relief from the separate acccount rules however, and she would have to use the age of the oldest of the 3 beneficiaries in determining the RMD requirement.

An interesting question arises in the event her mother passed after her RBD. Since the ruling does not directly address that situation, and life expectancy distributions are the default rule in that case, it would be worth the effort to request the penalty be excused for reasonable cause (RC) according to the procedures in the Inst for Form 5329, p 6. That could save her a considerable amount.



However, if the other beneficiaries transferred their share to their inherited IRAs, she would be able to use her own life expectancy since separate accounting has occurred.



I did fail to mention that her mother died after her RBD. I’m unsure if the two other beneficiaries have separated their respective shares from the deceased mother’s IRA’s. My client is estranged from her family.

Thank you for the excellent suggestions. I will pursue more information from the current custodians of the IRA’s and review the citations you provided.



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