Non-Spouse Bene of Deceased IRA Owner
My prospect just found out about a month ago that her deceased mother of 18 years, has an IRA with T Rowe Price. T Rowe is recommending that she retitle the account to an Inherited IRA. I think before anything is done, she must first address the issue if she can, since Mom has been deceased for 18 years and that she just found out about it. I thought one had till 9/30 of the year following the IRA owner’s date of death to make an election, as well as the inherited IRA did not exist 18 years ago. If she can, what about the RMD’s that were missed? Is their penalties? Can she apply to the IRS for relief. It would be appreciated if someone has any answers! Thanks!
Alek
Permalink Submitted by Alan - IRA critic on Tue, 2014-04-08 00:19
She should save the documentation that establishes that she did not know about this account as it may help getting the penalties waived when filing Form 5329. To further complicate matters, the current RMD Regs were issued in 2001, so this IRA was inherited under the prior Regs. Some questions – was she the only beneficiary? Did mother pass prior to or after her RBD? Was prospect named directly on the IRA, or was an estate involved? What amount are we talking about here and what was prospect’s age in the year she inherited the IRA?
Permalink Submitted by Aleksandar Krakovic on Tue, 2014-04-08 17:32
She is the only beneficiary on the IRA; the mother passed away before her RBD; daughter was directly named on the IRA; We are looking at $30k; she was a minor when her mother passed away
Permalink Submitted by Alan - IRA critic on Tue, 2014-04-08 18:25
At the time of her Mother’s death, the pre 2002 RMD rules stated that the 5 year rule was the default method for IRA owners passing prior to their RBD. Therefore, she should take a lump sum distribution from the IRA. Normally, the penalty waiver procedure requires a 5329 to be filed for each year, but in this extreme case, she might try filing just one form for all those years, along with the reasonable cause and documentation that she did not know about this account until recently and immediately distributed the balance. A copy of the distribution statement should be included.