Inherited IRA RMD issue
In 1999 my mom passed away and I was 18 at the time. Her 401(k) sat in the company’s plan until last year when I did non-spouse rollover to an inherited IRA at a brokerage. She was not subject to any RMD at the time of her death. There are a lot of technicalities and specific tax laws, but I want to know if I can start taking RMD’s using my life expectancy tables or if I am out of luck.
Permalink Submitted by Alan Spross on Wed, 2010-12-29 04:08
Unfortuneately, you are subject to the 5 year rule under which you had to totally distribute the balance by the end of 2004.
About all you can do is take a lump sum distribution and file Form 5329 requesting that the IRS excuse the excess accumulation penalty which would have been 50% of the balance plus interest. The IRS is fairly lenient in this situation if you have any reasonable excuse such as no one told you that you had to take RMDs. There may be even better reasons if you did not know about the account, or there illness or other extenuating circumstances. But there is no way for you to preserve the stretch now without a very special situation and a letter ruling from the IRS.
Your distribution will be taxable unless there is some after tax money in the account, but there is no early withdrawal penalty.
Is the account worth more than 50k?
Were you ever notified from the plan about RMDs?
Permalink Submitted by Shanto Ahmad on Wed, 2010-12-29 04:26
No, the account balance is
Permalink Submitted by Alan Spross on Wed, 2010-12-29 04:42
If you have a WRITTEN statement that you could leave it untouched, that should suffice for the IRS to waive the excess accumulation penalty. Allowing the account to be registered in beneficiary form is no concession if you were clearly named as beneficiary. What are they saying you should do now?