family members discover they are beneficiaries of qual plan late
Hello
A group of 3 children found out last month that their father had listed them as beneficiaries (listed as “all my children equally”) on his NYS deferred comp 457 plan. He died on 12/11/2010 without having taken his first RMD that was due (b. 11/19/1939). His wife was also named as 1/4 beneficiary.
Separately, he had an IRA with the same beneficiary designation that was properly handled. All children opened their own IRA-BDAs and have been taking the RMDs as needed.
The question: What should these children do now about this new found inheritance? Are they too late to roll these funds into their existing IRA-BDAs (and pay whatever penalties are owed for missed RMDs)? Are they subject to the 5 year rule? Please help!
Thanks
Permalink Submitted by Alan - IRA critic on Mon, 2014-12-08 23:49
He passed after his RBD, so the 5 year rule does not apply. Since separate inherited IRAs were not established by the deadline, RMDs using life expectancies (if life expectancy is the default RMD provision under the plan) would be based on the oldest beneficiary, most likely his wife. Inherited IRAs could still be established now by each beneficiary, but the delinquent RMDs for 2010 (decedents) and 2011 – 2014 (oldest beneficiary) need to be distributed ASAP. Form 5329 can be filed for each year requesting that the penalty be waived for reasonable cause, that being not knowing about the account. Again, the 457 provisions might contain more restrictive requirements, possibly even requiring a lump sum distribution. The wife can still roll her portion over to her own IRA except for the late RMDs.
Permalink Submitted by David Mertz on Tue, 2014-12-09 00:05
Wouldn’t the RBD have been April 1, 2011, meaning that he passed before his RBD, bringing the 5-year rule into play? That would allow the plan to be distributed by December 31, 2015 and still avoid excess-accumulation penalties.
Permalink Submitted by Alan - IRA critic on Tue, 2014-12-09 00:58