Inherited IRA
Have 3 Primary Beneficiaries (All Daughters) where their father passed away 7-1-2011. There are 2 qualified annuities with 2 different carriers ( Forethought and Jackson Nat’l). There has been no death claim made yet and 1 of the daughters would like to set up her own inherited IRA. No RMD’s were taken after the owners death which I know is a problem. Was there any time window that had to be met for this to be able to occur?? I also understand that how the new acct is titled is critical. So if we have the existing carrier make the required RMD’S that have been missed can the 3 Beneficiaries still set up their own inherited IRA??? Thanks very much, Mark
Permalink Submitted by Alan Spross on Tue, 2012-08-28 17:57
I assume the father left IRA annuities.
The IRS is used to year of death RMDs not getting done in time because it takes time to sort things out. The year of death RMD should be taken ASAP after the omission is discovered and Form 5329 should be filed by the beneficiaries to request that the 50% penalty be waived for “reasonable cause”. In this situation, the IRS usually waives the penalty.
Note that the year of death RMD does not have to be taken pro rata by all beneficiaries. If one beneficiary needs the money, they can satisfy the year of death RMD themself. Whoever receives the year of death RMD will report the taxable income, not the estate. For the 2012 and later RMDs, each beneficiary will have to satisfy their own RMD requirement. The 2011 year of death RMD can be taken either before or after the separate accounts are established, and separate accounts must be set up no later than 12/31/2012 to enable each daughter to use her own life expectancy.