beneficiary never satisfied RMD.
Hello,
there is a bene IRA acct holder of ours that openned the bene IRa in 2008 but never took any money out. mother passed away in 1999 and daughter never took any distributions when she openned her bene IRA in 2008 with us.
what are her options?
Does she have to just close the account and pay penalties? she did not know she is supposed to take a RMD .
Permalink Submitted by Alan Spross on Mon, 2011-08-29 20:07
Unless the amount is very large, it may be best to just take a full distribution and then request that the penalty be waived using the procedure per p 6 of the 5329 Inst. While a stretch can be preserved, under PLR 2008-11028, the taxpayer had to pay the excess accumulation penalty for each year of delinquent RMDs. In your case here, 11 years of 50% penalties would probably be too much to pay to preserve the stretch unless the daughter is very young (low RMD and therefore low penalty) and/or the account balance large enough to pursue preserving the stretch despite 11 years of penalties.
The main point is that there is a better chance the IRS will waive the penalty if a full distribution is taken than there is if she wants to restore the stretch.