NonSpousal Inherited IRA
Is there a time frame in which a non-spousal inherited IRA needs to be renamed? For example, I have a client who’s sister passed away in November and she hasn’t changed anything with the IRA. If my memory serves me right I thought you had a year from the passing to change the name.
Permalink Submitted by Alan Spross on Mon, 2009-10-05 23:01
There is no deadline to re register the account. However, a long delay could result in:
1) Loss of separate account rules for RMDs if there is more than one beneficiary
2) Having to make up missed RMDs at one time and hoping the IRS will excuse the excess accumulation penalty for each year plus interest on the penalty.
3) If the beneficiary passes, having the IRA go to the estate rather than to a successor beneficiary selected by the original beneficiary.
4) In extreme cases, the account may even escheat to the state unclaimed assets account
In this case, the first RMD would be for 2009, but Congress has waived that. If you client is the only beneficiary, her first RMD can be delayed until December, 2010. This assumes that the decedent was current on her own RMDs. If there are other beneficiaries on the account, separate accounts must be created by the end of this year for each beneficiary to use their own life expectancy.
Permalink Submitted by Jeff Stanga on Mon, 2009-10-05 23:28
And if the account is not separated before the end of this year, does it go off of the oldest beneficiary?
Thank you.
Permalink Submitted by Alan Spross on Tue, 2009-10-06 00:03
Yes, the RMD for all beneficiaries is based on the age of the oldest designated beneficiary, even if the separate accounts are set up later than this year. The problems are even more severe if there is a non individual beneficiary such as an estate, charity, or trust. A trust that would otherwise be qualified becomes non qualified if trust deadlines are not met, eg a 10/31 deadline of the year after death to provide trust documentation to the IRA custodian.