IRA RMD relief available?
Is there any relief available to avoid the “5-year rule” given the following facts:
Decedent died in 2007 owning a rollover IRA. A trust for the benefit of decedent’s daughter is the designated beneficiary. The daughter was age 2 at the time of her mother’s death. The IRA has not yet been claimed. Since the time has expired within which to comply with the IRS rules for a “see-through trust” because the trust document was not provided, the IRA must be fully distributed by the end of 2013. Given the very young age of the beneficiary of the trust, it would be a great advantage to calculate the MRDs based on her life.
Permalink Submitted by Jose Morales on Thu, 2011-03-31 16:39
Any relief would have to come from the IRS, most likely in the form of a private letter ruling. This is not a decision that the IRA custodian can make themselves, if that is what you were thinking.
Permalink Submitted by mk foss on Thu, 2011-03-31 17:03
When the IRS has given relief it involved taking the distributions missed on life expectancy and paying the 50% penalty.
I know of one case where a surviving spouse trust beneficiary filed a 50% waiver request with the IRS and took 4 years of distributions all at once to try to switch to life expectancy. The IRS granted the penalty waiver but that doesn’t mean that she’s absolutely safe from them coming back and saying she had to take evrything out in the 5th year.
In lieu of a private letter ruling, you could take out missed distributions for 2008 and 2010 and request a penalty waiver and then proceed with life expectancy. It might not work but it may be worth a try.