Financial Inst. distributed RMD w/o knowing of death
Fidelity took out the RMD from my mother’s 401K on Dec. 15. I had not notified them of her death (on Nov. 23 at age 85) until Dec. 17. Can that withdrawal be re-credited to her 401K? She had four named beneficiaries (myself and siblings each getting equal amounts) on the 401K. Time permitting, can we set up individual inherited accounts and take our individual RMDs based on our ages?
Permalink Submitted by Alan Spross on Mon, 2010-12-20 00:40
Sorry to hear of your loss.
You should return the check along with a death certificate and have the RMD reissued as 4 equal checks to the beneficiaries. Best to do it this year, but if no time to get it done before year end, you can get the penalty waived by filing a 5329 on your returns.
You have until 12/31/2011 to establish separate accounts by transferring your shares to inherited IRA accounts. You can then use your respective life expectancies for RMDs starting in 2011. You may have to redeem the investments to cash prior to distribution depending on the holdings.
Note that you also have the opportunity to convert your shares to inherited Roth IRAs if you wish. If done prior to year end you can defer the taxes to 2011 and 2012. This opportunity does not exist had you inherited an IRA. If you do this next year, you will have to distribute the 2011 RMD before converting. Note that inherited non spouse Roth IRAs are subject to RMDs as would an inherited TIRA.
Permalink Submitted by Linda Wells on Thu, 2015-12-24 02:43
It’s December 25 and Mom is failing rapidly. Mom’s traditional IRA custodian is scheduled to mail her RMD check on December 31, 2015, and says it can’t move any faster at this point. It is unlikely that the check will be received before Mom dies. Dad is 100% primary beneficiary. Son has POA, which terminates with Mom’s death. If the check is not cashed, neither Mom nor Dad (as beneficiary) will have satisfied her required minimum distribution for 2015. If the check was cut before Mom’s death, Son probably could wink a bit and sign as POA and deposit it to Mom and Dad’s joint bank account. Dad will be filing a joint return for 2015, and will pay the same taxes whether the 1099R is in his name or hers. Even though this course wouldn’t pass muster in law school, it might be a tolerable practical solution. If the check was cut after Mom’s death, however, then what? Would Dad ask the bank to reissue the check in his name and issue the 2015 1099R to him (instead of using Mom’s tax id). Or would the bank have to void the check and the 2015 1099R for Mom and issue a new 2016 check and a 2016 1099R to Dad (in which case Dad would then have to ask the IRS’s forgiveness for not taking the 2015 distribution)?
Permalink Submitted by Alan - IRA critic on Thu, 2015-12-24 04:31
Sad to have this happening over the Holidays. However, 12/31 is the absolutely worst date to schedule an IRA distribution, particularly an RMD. If the check is issued prior to Mom’s death and Mom passes before it can be negotiated by her POA, it will go through Mom’s estate. 1099R will be issued to Mom and RMD will be completed. If Mom passes before the check is mailed, then the check should be returned to be re issued to the IRA beneficiary and reported under the beneficiary SSN. It is very possible that the IRA custodian will not see things this way and that could result in problems. Perhaps to prevent an unforseen situation, the IRA custodian should be told that if they cannot get the check issued immediately, they are ordered NOT to issue the check at all until further notice. SInce the RMD will be late, a deathbed situation is a guaranteed penalty waiver for the RMD. If Mom survives then she will have two RMDs due in 2016, and if she does not, the beneficiary will receive the year of death RMD.