Inherited IRA
I have a client that inherited a traditional IRA from her Aunt, the aunt died in Nov. 2012, the IRA is still in the name of the deceased owner, is there a deadline as to the beneficary needing to have the inherited IRA account set up?
I have a client that inherited a traditional IRA from her Aunt, the aunt died in Nov. 2012, the IRA is still in the name of the deceased owner, is there a deadline as to the beneficary needing to have the inherited IRA account set up?
Permalink Submitted by mk foss on Wed, 2013-09-04 16:19
The first RMD for the beneficiary is due 12/31/13 – best to set it up by then. The sooner the better though.
Permalink Submitted by tomd37 on Wed, 2013-09-04 18:36
Just curiosity on my part, assuming the Aunt was taking RMDs, how does that play into things if she did not take all or part of her 2012 RMD before passing? I always learn something from these forums. Tom D.
Permalink Submitted by Alan - IRA critic on Wed, 2013-09-04 20:22
Tom, if the aunt did not complete her 2012 RMD, the beneficiary should attempt to complete it by the end of 2012. However, particularly in late year deaths this does not get done in time, but the IRS will usually waive the penalty if beneficiary files a 5329 and includes an explanation of reasonable cause for the delay and has made up the late RMD. This also applies to the beneficiary’s own RMDs for 2013 – if not completed by 12/31/2013, a 2013 5329 should be filed to request the penalty waiver and the late RMD made up ASAP. Strangely enough, the IRS Regs do not say anything about omitted RMDs for years PRIOR to the year of death being a beneficiary responsibility. Evidently, in those cases where the owner never took any RMDs, the IRS is not recouping the taxable income from these RMDs. All that happens is the beneficiary inherits a larger account and therefore the beneficiary RMDs are larger over time.