IRA Distributions for Inherited IRA with trust as beneficiary
We have an inherited IRA with a trust as a beneficiary and there havent been any RMDs taken yet (the owner of the IRA died 3 years ago). Is there a way to switch back from a 5 year withdrawal to life expectancy-can we calculate what the distributions would have been, take them and pay penalties for late withdrawals and if so, are there additional things that would need to be done to switch?
Permalink Submitted by Bruce Steiner on Mon, 2014-11-17 21:36
Permalink Submitted by mk foss on Wed, 2014-11-19 23:47
If this is a qualifying trust, life expectancy is the default. If you pay the penalties for the missed years, there should not be a problem in using life expectany method going forward. You need to file Form 5329 for each year with a calculation. The trust must be a see-through trust in order for life expectancy to apply. I’m assuming that the decedent was under 70.5 and that’s why the five year rule was used. If the decedent was receiving RMDs, you’re defintely in penalty land.
Permalink Submitted by Alan - IRA critic on Thu, 2014-11-20 03:26
I would be concerned that if the trustee overlooked life expectancy RMDs, the trustee also might have failed to meet the 10/31 deadline (year following year IRA owner passed) for providing trust documentation to the IRA custodian. If that deadline was not met, the trust is not considered qualified and the 5 year rule would apply assuming IRA owned passed prior to the RBD.