Inherited IRA hell

Permalink Submitted by Alan - IRA critic on Mon, 2014-12-22 21:34

I regret your present circumstances, but you have done the right thing by retaining an attorney that represents your interests only. Have you been able to discuss with your brother to explain the status of his requests of WF? It sounds like he actually may be doing the best thing for all of you if the IRA is reformed to reflect two individuals and your SNT as designated beneficiaries. Your goal should be to end up with an inherited IRA with the beneficiary being your SNT. If the SNT was drafted correctly per CA requirements, and if the separate IRAs are set up by the deadline (12/31 of the year following her death), your RMDs from the inherited IRA to the SNT would be based on your life expectancy. That is apparently what your mother intended. The other provisions included in the SNT, particularly the trustee of the SNT should reflect your particular situation and are the more complex parts of this situation. I assume your mother passed in 2013, and the 10/31/2014 date is the deadline for the trust details to be provided to the IRA custodian, but the issue there is whether what they were given in 2008 meets that requirement. I hope your attorney specializes in SNTs because there are detailed issues regarding SNTs and how they operate when they are IRA beneficiaries. Your brothers have the same basic issues that you have, ie the separate inherited IRA accounts need to be set up by 12/31 (not 10/31) and this is done by a direct trustee transfer.
Your SNT will have to have it’s own tax ID number and it will probably have to file a 1041 tax return every year. Up to now you have probably not had to file a return. If the SNT meets CA requirements, your benefits will continue, but the downside is the annual tax return AND getting used to dealing with the trustee of the SNT. So there is a tradeoff in having your benefits protected and collecting distributions from your inherited IRA. The tradeoff is added complexity in dealing with the trustee who must conform to CA law and the requirements of the trust, and the tax filing requirements.
If deadlines are missed, it does not mean the problems cannot be resolved. Any legal options may be limited by the size of your share of her IRA.
Your attorney should be familiar with IRS PLR 2006 20025 regarding SNTs as IRA beneficiaries.
Note that this forum is not geared to provide legal advice, particularly in complex situations such as this. But we can help you in interpreting IRS rules for inherited IRAs. It appears that one of your issues here is being able to communicate effectively with other parties to get the answers you need and that is another service the attorney can provide if you have a good attorney.

Permalink Submitted by Lisa Ways on Tue, 2014-12-23 02:44

I have not been able to discuss with my brother, to explain the status of his requests of WF? He doesn’t seem to want to listen or care about how I feel or what I need from him – in the position he is in, for me. He wants to do what he wants to do, to serve himself first (BIG problem, for me). When I try to clarify and resolve this issue he replies with dissociative email/blackmail abuse. Apparently, the topic threatens him too much so he cannot simply talk about the real issue so that together we could simply ask to have the beneficiary form updated/corrected – before it is too late!!! Brother’s communication style has caused me much anguish, compounded shock, and health distress at the heart of the matter, and is in large part why my IRA biz has gone on unresolved so long. (I normally stay on top of my personal business in a timely manner.)Please clarify what you mean, “IF THE IRA IS REFORMED TO REFLECT TWO INDIVIDUALS and your SNT as designated beneficiaries?” WHAT TWO INDIVIDUALS ARE YOU REFERRING TO? What mom intended was INHERITED IRA, SNT FBO me. This did not happen, so this is why mom’s will is derailed and my life is now becoming so disrupted and undermined. When misguided brother and corrupt WF advisor got together behind my back, w/o so much as the basic courtesy of checking in with me, that is when we all should have discussed our goal to ask that the inherited IRA beneficiary be my SNT, as mom made enormous efforts and financial sacrifice to intend and obtain that in good faith for me. Since the lawyers at WF are so very clever (to say the least) they probably could have done or could do the correction/update (reformation) at that time or any time – if they thought to and wanted to! RIGHT? If I had been part of the IRA “back office” “exception” discussion about my 1/3 IRA, I think we could have asked to have the issue resolved without the need for a court hearing and the rest of the nonsense playing out like a sad soap opera. WF just needed and still needs to correct/update the beneficiary form for mom and me. IS THAT POSSIBLE? I’m wondering if it is NOT TO LATE? IN THIS “11th HOUR” for brother estate executor of IRA and co-trustee of SNT (who seems unduly influenced by corrupt advisor, and not cognizant of the socio-political and financial agendas within which they work; hence, the false rep and false witness antics to justify the error of their ways). Bro + WF seem more paranoid about litigation than doing their jobs to take care of their deceased elderly client and her disabled daughter beneficiary of a SNT/IRA. They have been going about it backwards, as far as mom and me and our best interests are concerned. I think they could simply correct the problem if they would just ask their lawyers to do it!!! No fuss, no muss. Their employees high up can do anything they choose to (like super demons or super heros).Yes, the SNT was drafted adequately per CA requirements. Bro & WF separated IRAs up long before they needed to be by the deadline (12/31 of the year following her mom’s death). My RMDs from the inherited IRA into the SNT would be based on my life expectancy which is what mom intended. (The other provisions included in the SNT, particularly with regard to the trustee(s) roles should have been spelled out in more specific language b’c the current reality does not reflect my & mom’s intensions w/ respect the administering of the SNT – but this is another problem to discuss another time.)Mom passed 3/19/2013. Her SNT details were provided to the IRA custodian in 2008 when the SNT addendum was sent to him by mom’s attorney, which the custodian apparently ignored or paid no proper attention to. I believe the SNT given to custodian in 2008 meets requirements.***I too hope my new attorney specializes in SNTs because of the detailed issues regarding SNTs and how they operate when they are IRA beneficiaries.*** The SNT is established w/ its own tax ID number and meets CA requirements. But because the IRA beneficiary form is not corrected/updated for SNT FBO me, my benefits will discontinue when I am forced to claim the IRA and RMDs next week!! Unless brother can get WF to update/correct (reform it) in time? (The downside of the annual tax return I can handle, but getting used to loosing my benefits AND dealing with an obnoxious family trustee who is not supposed to play any other role in my life other than to be a supportive family member and has been anything but is causing me the biggest health problems. His subjective reading into the ambiguous language of the SNT and assuming he is supposed to play the role of a corp role (which he is not) AND his propensity to misuse and abuse position and power (which he seems to enjoy doing a bit too much) is in breach of my and mom’s trust intension. Any suggestions here?? The tradeoff in having to loose my benefits and having to claim an adverse IRA only to go into a forced spend down rather than the IRA go into the SNT is NOT what mom intended for her daughter! Either way, it was intended that the corporate trustee would be the one and only who is a qualified experienced professional whose job it would be WITH ME to understand and deal w/ the complexities of four different bodies of overlapping law and spending list minutia.A CPA may be needed for CA law and the requirements of the trust, and the tax filing requirements – if the IRA has to be claimed and spend down, it will shipwreck my benefits and disrupt my life (next week, and for many years to come).I am glad to hear if deadlines are missed, it does not mean the problems cannot be resolved.What do you mean, “Any legal options may be limited by the size of your share of her IRA?”***I will ask CA attorney if he is familiar with IRS PLR 2006 20025 regarding SNTs as IRA beneficiaries.Thank you for help interpreting IRS rules for inherited IRAs.Yes, it appears that BIGGEST issue here continues to be not being able to communicate effectively and productively with other parties to get the answers and information I/WE need to solve the real issue (one piece of paper called an adverse beneficiary form). DO YOU THINK IT WOULD BE POSSIBLE TO HAVE WF LEGAL TEAM UPDATE/CORECT (REFORM) MOM’S ADVERSE BENEFICIARY FORM FOR HER & ME IMMEDIATELY, FOR A TRUSTEE TO TRUSTEE TRANSFER AND RMDS BEFORE THIS DEC 31ST?? Hopefully another attorney can provide many answers, before another deadline is missed, if he is good.Thanks for allowing me to rant on your time, and for the useful information 😉

Permalink Submitted by Lisa Ways on Tue, 2014-12-23 02:57

I have not been able to discuss with my brother, to explain the status of his requests of WF? He doesn’t seem to want to listen or care about how I feel or what I need from him – in the position he is in, for me. He wants to do what he wants to do, to serve himself first (BIG problem, for me). When I try to clarify and resolve this issue he replies with dissociative email/blackmail abuse. Apparently, the topic threatens him too much so he cannot simply talk about the real issue so that together we could simply ask to have the beneficiary form updated/corrected – before it is too late!!! Brother’s communication style has caused me much anguish, compounded shock, and health distress at the heart of the matter, and is in large part why my IRA biz has gone on unresolved so long. (I normally stay on top of my personal business in a timely manner.)Please clarify what you mean, “IF THE IRA IS REFORMED TO REFLECT TWO INDIVIDUALS and your SNT as designated beneficiaries?” WHAT TWO INDIVIDUALS ARE YOU REFERRING TO? What mom intended was INHERITED IRA, SNT FBO me. This did not happen, so this is why mom’s will is derailed and my life is now becoming so disrupted and undermined. When misguided brother and corrupt WF advisor got together behind my back, w/o so much as the basic courtesy of checking in with me, that is when we all should have discussed our goal to ask that the inherited IRA beneficiary be my SNT, as mom made enormous efforts and financial sacrifice to intend and obtain that in good faith for me. Since the lawyers at WF are so very clever (to say the least) they probably could have done or could do the correction/update (reformation) at that time or any time – if they thought to and wanted to! RIGHT? If I had been part of the IRA “back office” “exception” discussion about my 1/3 IRA, I think we could have asked to have the issue resolved without the need for a court hearing and the rest of the nonsense playing out like a sad soap opera. WF just needed and still needs to correct/update the beneficiary form for mom and me. IS THAT POSSIBLE? I’m wondering if it is NOT TOO LATE? IN THIS “11th HOUR” for brother estate executor of IRA and co-trustee of SNT (who seems unduly influenced by corrupt advisor, and not cognizant of the socio-political financial agendas within which they work; hence, the false rep and false witness antics to justify the error of their ways). Bro + WF seem more paranoid about litigation than doing their jobs to take care of their deceased elderly client and her disabled daughter beneficiary of a SNT/IRA. They have been going about it backwards, as far as mom and me and our best interests are concerned. I think they could simply correct the problem if they would just ask their lawyers to do it!!! No fuss, no muss. Their employees high up can do anything they choose to (like super demons or super heros).Yes, the SNT was drafted adequately per CA requirements. Bro & WF separated IRAs up long before they needed to be by the deadline (12/31 of the year following her mom’s death). My RMDs from the inherited IRA into the SNT would be based on my life expectancy which is what mom intended. (The other provisions included in the SNT, particularly with regard to the trustee(s) roles should have been spelled out in more specific language b’c the current reality does not reflect my & mom’s intensions w/ respect the administering of the SNT – but this is another problem to discuss another time.)Mom passed 3/19/2013. Her SNT details were provided to the IRA custodian in 2008 when the SNT addendum was sent to him by mom’s attorney, which the custodian apparently ignored or paid no proper attention to. I believe the SNT given to custodian in 2008 meets requirements.***I too hope my new attorney specializes in SNTs because of the detailed issues regarding SNTs and how they operate when they are IRA beneficiaries.*** The SNT is established w/ its own tax ID number and meets CA requirements. But because the IRA beneficiary form is not corrected/updated for SNT FBO me, my benefits will discontinue when I am forced to claim the IRA and RMDs next week!! Unless brother can get WF to update/correct (reform it) in time? (The downside of the annual tax return I can handle, but getting used to loosing my benefits AND dealing with an obnoxious family trustee who is not supposed to play any other role in my life other than to be a supportive family member and has been anything but is causing me the biggest health problems. His subjective reading into the ambiguous language of the SNT and assuming he is supposed to play the role of a corp role (which he is not) AND his propensity to misuse and abuse position and power (which he seems to enjoy doing a bit too much) is in breach of my and mom’s trust intension. Any suggestions here?? The tradeoff in having to loose my benefits and having to claim an adverse IRA only to go into a forced spend down rather than the IRA go into the SNT is NOT what mom intended for her daughter! Either way, it was intended that the corporate trustee would be the one and only who is a qualified experienced professional whose job it would be WITH ME to understand and deal w/ the complexities of four different bodies of overlapping law and spending list minutia.A CPA may be needed for CA law and the requirements of the trust, and the tax filing requirements – if the IRA has to be claimed and spend down, it will shipwreck my benefits and disrupt my life (next week, and for many years to come).I am glad to hear if deadlines are missed, it does not mean the problems cannot be resolved.WHAT DO YOU MEAN, “ANY LEGAL OPTIONS MAY BE LIMITED BY THE SZ OF YOUR SHARE OF THE IRA?”***OK – I will ask CA attorney if he is familiar with IRS PLR 2006 20025 regarding SNTs as IRA beneficiaries.Thank you for help interpreting IRS rules for inherited IRAs.Yes, it appears that BIGGEST issue here continues to be not being able to communicate effectively and productively with other parties to get the answers and information I/WE need to solve the real issue (one piece of paper called an adverse beneficiary form). DO YOU THINK IT WOULD BE POSSIBLE TO HAVE WF LEGAL TEAM UPDATE/CORECT (REFORM) MOM’S ADVERSE BENEFICIARY FORM FOR HER & ME IMMEDIATELY, FOR A TRUSTEE TO TRUSTEE TRANSFER AND RMDS BEFORE THIS DEC 31ST?? Hopefully another attorney can provide many answers, before another deadline is missed, if he is good.Thanks for allowing me to rant on your time, and for the useful information ;)I AM SORRY I DON’T HAVE ANY MOE TIME TO PROOFREAD AND EDIT THIS REPLY PROPERLY. SO SORRY!!! sending as is.

Permalink Submitted by Alan - IRA critic on Tue, 2014-12-23 03:17

You were asking what I meant by the “other two individuals” – those would be the other children who I assume would each get 1/3 of her IRA, and your SNT was intended to receive the other 1/3. It is not clear what actually happened in 2008, whether your mother intended to separate her IRA at the time into 3 accounts, or just to amend the existing beneficiary clause to the beneficiaries as 1/3 each to other childern and 1/3 to your SNT with the SNT specifically listed as 1/3 beneficiary. Then after her death the IRA would be separated into separate accounts for each. If there was mishandling or clerical error on WF part in 2008 or afterward, perhaps the IRA can be reformed retroactively as your mother’s attorney intended. That attorney should have followed up and if he did not, that is malpractice. At this point we cannot tell who messed up individually, or if this was some combination of everyone who handled this matter. But the best bet for everyone involved here would be to have WF reform the IRA beneficiaries to what should have been done.
Do not worry about the RMD, but I would like to know whether your mother passed prior to her RMD required beginning date or after as this affects the RMDs if things do not go well. Her required beginning date was 4/1 following the year she would have reached 70.5. Better if she passed after that date than before.
I am not an attorney, but I believe there is also a “self settled SNT”. My impression of that type of SNT is that it can be funded with your own money such as money distributed as RMDs from your share of the IRA. But the remainder beneficiary on a self settled SNT must be the state of CA (after you pass) instead of any beneficiaries you would rather have left the money to.
By size of the IRA, I was referring to how the legal fees you might incur would be paid. And how much you would be wise to spend on legal fees in relation to the IRA. You would proceed differently if your mother left a 1mm IRA than you would if it was only 100k and your share was 33.3 k.
Do not worry about RMDs right now. Under the circumstances, the RMDs can be distributed after the beneficiaires are resolved and in fact WF (I assume WF is the custodian of the IRA) will not distribute anything until the beneficiary situation is clearly settled. That said, if the problem only involves whether your share will be individual or SNT, the other children might be able to get their shares transferred to separate IRAs. However, it is possible that the entire beneficiary set up is subject to question. We do not know the facts so I am just speculating. Remember that if you do not take the RMDs your benefits will not be affected until you do. There is no taxable income for anyone to transfer into separate inherited IRAs. Taxable income only occurs if distributions are sent from the IRA in a check payable to beneficiaries.
For future reference, if you want to move your share of the IRA later on to another custodian, this can be done but only by direct trustee transfer. Resist any distribution payable to you until you and your attorney are positive it is correct because a distribution to you CANNOT be rolled over. It will be irrevocably taxable.
To summarize, it is regretable that this has not yet been completed, but things still must be done in order. First, the final beneficiary designations must be determined, second the separate inherited IRAs established by transfer, and then the RMDs last.

Permalink Submitted by Lisa Ways on Tue, 2014-12-23 20:37

mom passed after her RMD beginning date (age 86). 73K IRA (1/3 for me that was supposed to be trusted for me).WF separated beneficiary form (last winter, behind my back, w/o my knowledge, input, consent.) That would have been the proper time for ALL of us to discussed this, that would have been time to solve the issue to update/correct/restore my 1/3 bene form according to mom’s purpose and intention). WF custodian decided he a wanted a quick cover and instead of asking lawyers to correct my 1/3 bene form they left me out of the loop so I couldn’t “talk”it and brothers could take their 1/3 and run to make them happy, leaving me in inherited IRA hell still with an adverse bene form for me to deal with!! Corrupt custodian + Jerk brothers = not decent or right thing to do. Now what? If I take it the way it was made for me, the way I’m stuck w/ it, it will wreck my benefits and life, or cost a ton in court and be a bureaucratic nightmare for years to come. I will see attorney this afternoon. Any parting pearls of wisdom?.

Permalink Submitted by Alan - IRA critic on Tue, 2014-12-23 22:18

Not sure what you mean by “restore” the beneficiary form. Was it your mothers intention to leave you 1/3 of the IRA or 100% of it? So this boils down to two questions – 1) How much of her total IRA did you receive and is that less than you expected? and 2) Was your interest to be individual beneficiary (benefits jeopardized) or was your SNT to be the beneficiary on your behalf (benefits continue if SNT qualifies per CA law)? Your attorney needs to determine exactly what the status is now. I am not sure what you meant by WF “separating beneficiary” form? Could you explain your understanding of what they did. Was the SNT added to the account as 1/3 beneficiary instead of your personal 1/3 or was the IRA separated into 3 IRAs with your SNT the beneficiary of one of them? Or something else?

Permalink Submitted by Lisa Ways on Wed, 2014-12-24 01:28

Mom’s INTENSION was to leave me 1/3 of the IRA in her SNT in 2008 so my benefits would not be disrupted. Mom’s attorney sent mom’s WF advisor a copy of her SNT in 2008. Her beneficiary form was never updated to reflect mom’s INTENSION as it should have been. Her attorney and advisor dropped the ball. I have not claimed the 1/3 IRA (yet). My 1/3 IRA interest was to go into SNT for me, but unfortunately the IRA beneficiary form was/is in error since 2008 and my name is still on the beneficiary form (benefits jeopardized). If the form has been updated, as it was supposed to be in 2008, then benefits would continue as the SNT qualifies per CA law. This is the status now. WF gave my two brothers their 1/3 each portion. It looks like I will have to claim my 1/3 and loose my benefits, live off the IRA (not what mom intended). The IRA should have been separated into 3 IRAs with my SNT the beneficiary of one third for me before mom passed. My question now is can WF update the IRA beneficiary form and name the SNT on the IRA as SNT beneficiary instead of me as beneficiary (as mom intended it to be done, before she passed) now that she passed? Would that be legal for WF to do that? Or is the IRA in error (beneficiary form) no longer able to be corrected, legally, by WF?

Permalink Submitted by Alan - IRA critic on Wed, 2014-12-24 16:43

OK. that is what I thought her intent was, simply to amend the IRA in 2008 to remove you as beneficiary of 1/3 and substitute the SNT. If this was not done due to failure of WF to interpret the instructions, they should review all the correspondence and retroactively make the change to the SNT in lieu of you personally. Your brothers now have their separate accounts so this issue no longer affects their interests in the IRA, so there is no reason they should object to making the change. They do not get any more whether the change is made or not. Note that the current IRA status described in your last post constitutes separate inherited IRA accounts by the 12/31 deadline because your brothers received their inherited IRAs. All that is left of the original IRA is your share that you hope to have changed to the SNT share. The RMDs you will have to take will be the same either way, in other words each year the RMD based on your age as of 12/31/2014 will be paid either to you individually or if the beneficiary clause can be reformed, to the SNT. This assumes that the SNT info was received by WF by 10/31. If they do not accept the SNT as beneficiary, then it does not matter whether they received the info by 10/31 or not. What is your attorney doing to get WF to consider amending the beneficiary to the SNT? To answer your question, it is legal for WF to make the change if they agree that they should have made the change back in 2008 or at least asked the appropriate questions when they received the form. Or are they saying they never even received it? Now if WF refuses to change it, your attorney may feel the evidence is clear enough to seek a court order to make the change anyway. What does he think of that possibility?
Do NOT take your RMD out until this is resolved one way or another. The IRS is almost certain to waive any penalty for being late under these circumstances, but if you take a distribution before this is resolved you will add more complexity to the situation and probably jeopardize your benefits by having received the income. Even if this takes a year to resolve, do not take a distribution unless you are willing to possibly forfeit your benefits.
Finally, if the beneficiary clause cannot be changed, have your attorney look into a self settled SNT. That may turn out to be a decent fall back option.
Note that your brothers have not done anything to worsen your situation. It appears the primary negligence here points to your mother’s attorney, who should have followed up to be sure WF made the beneficiary change back in 2008, unless there are other factors I am not aware of. But your brothers should have called you and explained that they created the separate accounts for their shares, but were not able to do anything about the SNT situation.

Permalink Submitted by Lisa Ways on Wed, 2014-12-24 21:32

WF advisor is saying they never received and do not have a copy of mom’s SNT addendum (but this is a lie; I asked them in March of this year to send me a copy of it and they did; it is still in their overnight FedEx packaging unopened). The WF advisor clearly does not want to own this. (The WF lawyers also seem more interested in covering rears than facts, truth, or their deceased elderly client and her disabled daughter.) My brother is Executor of Estate and SNT co-trustee; his attorney is mom’s attorney. He dropped the ball so isn’t going to help me. Brother wants to sweep it under carpet as my problem now. I regret to inform you that I have not been able to find a good estate attorney who is versed in gov benefits to take on this situation. I had a very good one but did not sign the fee agreement and move forward because I had too many questions unanswered. Hindsight is 20/20. If I had agreed to let her handle this I would be doing a smart spend down instead of having sleepless nights and seizures over this. Should I send WF a copy of my mom’s SNT addendum for the IRA that the advisor is denying ever having? Would they help me or use that as more dirt for a cover up to bury me under? I missed the RMD 12/31/2013 (9 mo after mom’s passing) This would be the second RMD miss 12/31/2014. I should NOT take my 2 yrs of RMD? Honestly, the IRA is $73K and the loss of state SSI benefits would be $589.40/mo. I heard it can cost $10-20K to go to court to have this amended. Meanwhile, I have been using some of the SNT $ for supplemental needs. It the IRS digs through all of it with a magnifying glass and fine tooth comb I am scared it will be a nightmare of huge hassle and losses for the rest of my life. At this point, I am inclined to take the RMD before Dec 31, 2014 and forfeit my state SSI monthly income and replace it with IRA income. If I miss the second RMD (and I still have no attorney) is that going to be a horrible decision (apart from the hefty penalty and fee). Is there any CPA in the world that can get a waiver for 2 yrs in a row? I could look into a self settled SNT but I still don’t have an attorney to do that, and I’ve already been told SSI is going to count IRA as income AND I may have to pay back since mom passed b’c there is no pay-back in the SNT! (oops, mom’s SNT attorney). I agree mom’s attorney probably should have followed up. He claims he didn’t know about the IRA, but if that’s true then why did he send a copy of mom’s SNT addendum to her advisor? (everyone knew about her IRA). And I think the advisor should have called mom and/or her attorney ask their intension. Mom was 86 and trusted her attorney to take care of this for her. Apparently, he thinks it wasn’t his job to do due diligence. Thank you for the kind comment about my brothers. I just think they should have told me what they were going to do BEFORE they did it; they purposely left me out of any conversation so I wouldn’t “talk” about any of it. That “back-stab” ruined trust and relationship between us as it was a breach of good will with me. I devastated me for a year and is a big reason why I could not move forward w/ this business after they ‘did that to me.’ Can you give me a ballpark figure what two years of RMD check would be on $73K? The three of us are on the beni form. I was told it is calculated by mom’s age. She passed when 86 yrs old. Thank you for replying (asap:)

Permalink Submitted by Alan - IRA critic on Thu, 2014-12-25 22:00

The 2013 RMD must be completed ONLY IF your mother did not take it before passing. If she did, there is no 2013 RMDs for the beneficiaries. If she did not, the unsatisfied part of her 2013 RMD (based on 12/2012 balance) becomes a joint responsibility of all the beneficiaries. That RMD is taxed to the beneficiary who receives it. In your situation, you probably have no way of knowing whether this was done or not. So unless you can find out, I would not worry about the 2013 RMD.
The 2014 RMD will be based on each beneficiary’s age as of 12/31/2014. This divisor is shown in Table I of Pub 590, or if you want to indicate your age, I will give you the divisor. The 2014 RMDs are an individual responsibility of each beneficiary for each of your separate accounts. I think you have your own separate account, instead of the SNT holding yhour share of the IRA. You would use the divisor relative to 1/3 (your share) of the total IRA balance on 12/31/2013. If you cannot find out that balance, use the balance on your inherited IRA when it was set up or when you first were aware of it. You may have to call WF to get this balance if you do not have any records.
I assume that 73k was YOUR 1/3 share of the IRA and not the entire IRA before it was divided into separate accounts.

Permalink Submitted by Lisa Ways on Fri, 2014-12-26 00:33

1) Mom did not take 2013 RMD before passing. How is this calculated? She was 86; passed 3/19/2013. The IRA was separated; my portion currently = $73,184.85 (~$73K)2) 2014 RMD is calculated how? Based on my age? I am 56 w/ next birthday in 2014. How is this calculated, using Table 1 of Pub 590. Use to use the divisor relative to 1/3 of the total IRA? When it was set up, OR when I was first aware of it (WHICH date would be the correct one to use?) It will most likely be set up and claimed before Dec 31, 2014.Could you do the number crunch for me? I’m having a bit of a hard time understand any of this at the moment. I know you cannot advise. Could you send me your numerical opinions? This would be invaluable help for me at this time to plan budget and so on…3) Hypothetical question: IF I didn’t take the 2013 & 2014 RMD before Dec 31, 2014 deadline, then if I tried to take care of this after the 1st of Jan would it be a much bigger mess than it already is? I still do not have an attorney, and finding one that is right for job wouldn’t be until after the 1st. In this scenario, would IRS probably grant pardon for 2013 under the circumstances but not likely two years 2013/2014? What is your opinion about this? If I wait until after 1st I would then have take 2013, 2014, 2015 next year, and then what would be the penalty and fee on 2014 be if it was not waived if I did not get a pardon for both 2013/2014 (assuming optimistically that a pardon would be granted for 2013).

Permalink Submitted by Alan - IRA critic on Fri, 2014-12-26 04:04

Your 2014 RMD should be based on 1/3 of the total IRA year end value 12/31/2013, but I don’t think you will be able to obtain that information. If you cannot, then just use your best guess regarding the value. If you are 56 at the end of this year, you would divide that value by 28.7. For each year thereafter reduce the divisor by 1.0, so you would use 27.7 for 2015 RMD etc. If you had to use the current value because you could not determine 1/3 of the 12/31/2013 total IRA value, your RMD would be 2,550. So you can see that it will be a very small amount. Of course, you can withdraw more if you wish, but not less. Your mother’s 2013 RMD would be the 12/31/2012 value divided by 13.4 if she would have reached 87 by the end of 2013 or 14.1 if she still would have been 86 on 12/31/2013. Too bad you cannot find out what your brothers withdrew, since they might have already satisfied the year of death RMD but with no cooperation, that will not be possible.
As I indicated, if you apply for a penalty waiver due to the adverse circumstances here (done with brief explanation with Form 5329), the IRS is very likely to approve the waiver for both 2013 and 2014. Remember that 1/3 of your mother’s RMD will be much higher than your 2014 beneficiary RMD because of her age. You have to apply for a 2013 waiver anyway because the year of death RMD should have been taken by year end 2013. So basically, what you are doing here is estimating both your share of the year of death RMD and your own beneficiary RMD for 2014 and requesting the total be withdrawn by year end. You must move fast to get the distribution done. But if you cannot get this done, you can probably get the waiver approved anyway after you take out the amount early next year. You cannot file the 5329 until the back RMDs are taken out.
To backtrack, I think you have concluded that due to the cost and difficulty in finding a good attorney with a specialty in SNT trusts, you have given up on getting WF to add the SNT as beneficiary retroactively.

Permalink Submitted by Lisa Ways on Fri, 2014-12-26 07:59

Thank you very much for gracious answer to question (on Christmas)…1) I have a question two questions about legalities, if there is an attorney who could answer about NY state law. I just want to know legalities, this question isn’t about ethics or personalities:A) In NY State, when there are three beneficiaries clustered on an outdated 2004 beneficiary form and that custodian receives a SNT from an attorney for his elderly 86 yr old client who is trusting her attorney and custodian to put everything in order for her (for her disabled daughter w/ SNT) is there any responsibility involved at that point on the attorney and/or custodian at that point? What is considered routine or due diligence. )I am still reeling in shock from this adverse IRA (beni form) and what it has done to my health and life.) Or was it my mom’s responsibility to pick up the phone to her custodian. There is no way she would have ever known there would have been an issue. She just expected that her 10K in fees would get her purpose and intension completed. Was mom to know to hire a specialist to coordinate jobs of attorney and custodian. This idea is absurd to me, but that is what the attorney and custodian told bro and he believes them… Am I imagining things, or was mom taken advantage of and the attorney and/or custodian remiss?B) WF office of custodian last week denied that they received or have copy of SNT (I knew they would). I know this is a lie b’c in March I requested that they sent me a copy of mom’s SNT addendum at their office in their file which they did. It is still in FedEx envelop unopened. Then, they had their WF lawyers fabricate “conversations” and “advice” that they supposedly gave me about the IRA which never ever took place. (I’ve actually never once in my entire life spoken to that advisor, and all they ever gave me via bro was a blank disclaimer form to sign and send back to them with advice to my bro for me to do that form. It seemed suspicious to me so I didn’t sign it, plus the fact that this the custodian who never updated the beni form so why should I trust anything he would say or do at that point; no one would.) When I talked to CA attorney she said it was “scary.”) Total cover up job. Last week when they told me again they told me they don’t have a copy, they told me to send them my copy “so they could run it by their legal dept to see what they can do.” With their history of incompetence, corruption, dishonesty and going out of their way to lie and falsify a cover up (which feels very abusive and is probably illegal) would I or should I expect them to help me out or have mom’s or my best interests in mind? I don’t want to sound paranoid but their characters and behavior are not exactly upright and trustworthy and personal history does have a way of repeating itself. So I think bets may be off that if I asked them to restore beni form to mom”s original intension that they would do it. It seems like maybe they want a copy of SNT (which must have been shredded) to finish their cover job to bury me (to avoid liability litigation). I’ve met other people w/ WF stories as horrifying as my experience so evidently this is normal corp culture for their operations. Given the history at WF I honestly can’t trust people who are so trecherous and use lawyers to make up documentation about someone doing their job who didn’t. Isn’t there a legal word lawyers misusing their position and power to do that sort of thing?C) Given the above behavior history, would it be reasonable to believe that they would change the beneficiary form for me? A CA attorney told me that it is not legal to change a benificiary form after the grantor has passed, even if it is adverse, w/o a court order. Would you find out what the law is in NY State regarding this? I’m guessing it is the same. It is in my name and soc so would it be possible to change in their legal dept (legally)? If that was done illegally I imagine it could make a major mess for me down the path w/ IRA and state of CA if everyone wanted to question the legality of it… who would help me out then? Certainly not WF. They would leave me on my own to be buried alive (like they are already trying to do now it seems)… 2) Another legal question: In NY state, when custodian and two brothers got together to separate beni form w/o discussing it with me first and I was owner of 1/3 of the IRA, without my knowledge and consent, was that legal? Did I have the legal right to be informed before that took place, or give my consent before that took place? I know they did that so I wouldn’t “talk” about the real issue (so I’m blogging about it instead). Did they have the right to do that? Perhaps. After the fact, they said it was a “back office” decision at the IRA dept in St Louis and an “exception.” An exception to what? The law? If so, what laws? I really need to know the answer to this question to put it to rest… I know you can’t say anything about a particular co. I just want general answers answered but as specific info as possible. Thanks if you can answer any or all of them.Having trouble previewing this reply so sending as is.

Permalink Submitted by Alan - IRA critic on Fri, 2014-12-26 19:06

I can only address the second question. IRA accounts often include several beneficiaries including non individual beneficiaries such as charities or trusts. Because the individual beneficiaries or beneficiaires of qualified trusts can only use their own life expectancies for RMDs if separate accounts are created by the deadline (12/31/2014 in your case), these actions are entirely normal. Each beneficiary must submit requested documentation including a death certificate, SS number of beneficiary and other paperwork requested by the custodian. Very frequently when there are multiple siblings as beneficiaries, this information is submitted separately at different times or not at all by one or more beneficiaries. Those that submit the info and have the separate account created will have an inherited IRA that is no longer connected to the other IRAs or beneficiaries. Since this is an individual process, it does not require coordination with other beneficiaries. However, what does require communication is determining if the year of death RMD had been satisfied by the decedent, and if not whether each beneficiary will distribute their share (1/3 of it) or whether any beneficiary needs to withdraw more than that. For example, if her 2013 RMD was 10k and one brother needed 10k that year, his distribution would satisfy the RMD and the others would not have to take a distribution. This is why I earlier described the year of death RMD as a JOINT responsibility of the beneficiaries. Typically, if none of the beneficiaries want to take out extra, each one takes their share, but as you can see it takes some communication to determine who will take the year of death distribution. It is usually the executor’s responsibility to determine whether the decedent satisfied the RMD before passing or not. Beneficiaries are only responsible for the year of death RMD. Had your mother missed RMDs for years before that, the tax code is silent so it is generally believed that the IRS will not expect beneficiaries to make up decedent RMDs for years prior to the year of death. In summary, your brothers did have the right to create their separate accounts independently. Now if they created separate accounts leaving only your share behind, you are the only one left on the original IRA, and therefore the original IRA has become YOUR separate account. So you have a separate account by default even if a separate IRA with your SS number (or the SNT TIN if WF ever reforms the beneficiary) has not yet been created.
Now if you cannot afford or choose not to retain an attorney to represent you, then you might as well cooperate with WF if they are reaching out for information. What do you have to lose? They will always be concerned that you will retain an attorney and the potential for damages and bad faith punitive damages. They cannot keep the money so really have no interest in not resolving this. If you mutually do not want to deal with each other in the future, perhaps you can offer to transfer the account to another custodian right away if they will accept the SNT as beneficiary. Then they would avoid the legal costs of reviewing it to see if it qualifies or not.
With respect to the first question, the basic responsibilities of a custodian in NYS are no different than elsewhere. They had a duty to accept the SNT as beneficiary or to reject it in writing. Maybe they did that and you were not told about it.

Permalink Submitted by Lisa Ways on Sat, 2014-12-27 04:57

Thanks for basic info and answers to questions about IRA. 1)What is SNT “TIN” if WF were to reform the beni?The SNT is qualified; and currently active w/ partial funding. The IRA was not “qualified” by Dec 20, 2013 as it should have been which may be another complicating factor ( tax problem). 2) I still have some technical and legal questions: A) According to NY state and/or CA law: can a beni form be reformed (changed/updated) like it should have been) by WF, AFTER grantor’s death – without a court decision? In other words, could the beni form be changed/updated (legally) based on a SNT addendum because the “IRA is in error” as legal reason enough, at this late date? B) How exactly could that work out legally to have IRA beni form changed to SNT, NOW that IRA has been in my name/soc – to change this beni form fact – after this fact of mom’s passing, w/o an IRA court decision? Wouldn’t someone in IRS and/or CA probably question this to see about the legality and reason for that change? I assume then the burden and expense of that inquiry of any update correction would fall on me? So any change should take place BEFORE I claim IRA right? Also, the IRS and/or CA may then want to go into the SNT (which I’ve used on occasion) so at this point it may make more sense to avoid dealing w/ any potentially risky expensive unknowns (for me, and no one else). C) Comment: consider the fact that when an IRA goes into a SNT it has compressed highest tax. There may also be a 5 yr spend down time limit for an IRA in the SNT, but I’m not sure about this; if true, 2 or those 5 years have passed leaving just 3 yrs. So, from the tax standpoint the SNT may not have been the best option. I read that ideally a grantor of IRA should put it into a Roth for a SNT before their passing. Now, would it be less expensive in the long run to put IRA in SNT or claim IRA and loose $589.40/mo SSI income check and spend down IRA instead? I have no idea how to figure out the tax of these two options. If you do then please feel free to offer any suggestions or your what would you do if you were in my shoes opinion. D) Any idea why WF asked me to send them a copy of the SNT addendum after telling them they don’t have a copy (when they did)? How and why would they want to back peddle for themselves now? For me and my benefit? What other motive could they possibly have in asking me to send them a copy of SNT (besides restoring beni form to SNT for me)? That’s not my job, but I’m sure mom’s attorney could send them another copy, the same one he sent them in 2008. ((Rant: The WF custodian of mom’s IRA has a history of corruption and their lawyers bailing him out of his messes. There seems there may be a dubious relationship there. Could I be their next meal for lunch? The fact that that office denied ever knowning about the SNT after they sent me a copy of it is absurb. AND, that office had lawyers then write up fictitious conversations and “advice” that they supposedly had with me which never took place. So what would be next, for me, w/ this office? It seems like all they are interested in is lying to cover up; not the best interest’s of their clients, deceased elder mom’s intentions for me. Based on their behavior history with others, and me, I have no reason to believe or trust that “cooperating” with WF legal would benefit me ultimately, unfortunately… but I could be mistaken. E) Back to basic NY state law about custodian “duty” to accept a SNT as beni OR reject in writing; that reject letter would have been sent back to same attorney who sent them copy of SNT in 2008, right? Their duty would have been to reject in writing to mom’s attorney letter OR separate the beni form to name 1/3 IRA to SNT? And if he did the latter, would it have been custodian “duty” to send letter that that change/update was done? So, you are saying it is NOT legally normal or acceptable for a custodian to receive a copy of a SNT addendum from an attorney and then do nothing to acknowledge it (please confirm)? Also, if attorney never received reject or accept letter (I assume he didn’t, but will ask) is it attorney’s duty to follow up on the copy of SNT addendum that he sent custodian if no response? I am not sure who is responsible, for what would be considered right practice, and due diligence (technically, legally) on both sides. Please clarify if you can. F) Transfer of IRA account out of that office and into professionally competent responsible hands is a good idea. Legal question: if I claim/transfer IRA would that then release them of ‘potential for damages and bad faith punitive damages’? (The “IRA is in error” may be damages done and no action on my part can be affordable and/or change that fact. Also, I feel it is not my place or position to send legal docs to them to help them clean up their mess or undo their cover up efforts to date (for their benefit) when honestly given their track record thus far I really don’t think they would do anything for my benefit of their free good will… or they would have done that by now, don’t you think? They have had almost two years to take SNT and beni form to court to correct the error for me? The decent and right thing to do would have been for them to offer to correct their error. But WF custodian and lawyers are clearly not interested in doing the decent and right thing – ever – if it costs $. G) If I proposed to WF to transfer the account to another custodian right away if they will accept the SNT as beneficiary they may still need to go to court at their expense to prove that to correct the beni, so there is still this question about the legality of this process, if it would FIRST require a court hearing, YES OR NO, as beni is already in my name/soc as far as IRS is concerned? AND, they would have to accept the legal costs of correcting their error FIRST. (The SNT qualifies, in NY & CA). This process would take into the new year, as it is probably not likely they are going to put an acknowledgement in writing that the Trust is the beneficiary of an unqualified IRA and a commitment in paper w/o an attorney to challenge them. I’ve read it costs a minimum of $20K to get a court decision about a change of IRA beni form. H) There is also the concern of not wanting this to drag in into another year… as far as the IRS is concerned this could reflect badly on me (not WF)… are you sure I could ask for a pardon for 2013,14,15? (THREE years seems like something that would be questioned and possibly need more of a defense than a piece of tax form paper, no?) I) How would I find out if there was a WF reject in writing letter (which I so seriously doubt, b’c then there would be no need for WF to deny having ever received the SNT). I should have an attorney contact mom’s attorney for that info? Would NY who attorney who drafted SNT be required to provide me w/ that info. as beni of a SNT who (really may not have any legal rights regarding SNT; the IRA is legally separate at this point)? NY attorney could say he will deal only w/ Executor of estate and/or Trustee of SNT (my bro) and this attorney knows bro wishes not to help me address the real issues. If I needed for bro to ask mom’s attorney for letters about SNT between attorney and custodian, as Exec/Trustee is he obligated to help me with that? IF he didn’t would he be in breach of Exec/Trust duty? The IRA is part of estate, but NY attorney is now saying IRA is not part of estate.)J) Is it possible to ask the IRA to “qualify” an IRA that should have happened by Dec 20, 2013 – but didn’t b’c of above hardship disability status and other extenuating circumstances? I’m exhausted but making progress toward understanding issues to hopefully make decisions on Monday.For some reason, unable to edit/format this reply into paragraphs so have to send as is… sorry!Thank you.

Permalink Submitted by Lisa Ways on Sat, 2014-12-27 04:57

Thanks for basic info and answers to questions about IRA. 1)What is SNT “TIN” if WF were to reform the beni?The SNT is qualified; and currently active w/ partial funding. The IRA was not “qualified” by Dec 20, 2013 as it should have been which may be another complicating factor ( tax problem). 2) I still have some technical and legal questions: A) According to NY state and/or CA law: can a beni form be reformed (changed/updated) like it should have been) by WF, AFTER grantor’s death – without a court decision? In other words, could the beni form be changed/updated (legally) based on a SNT addendum because the “IRA is in error” as legal reason enough, at this late date? B) How exactly could that work out legally to have IRA beni form changed to SNT, NOW that IRA has been in my name/soc – to change this beni form fact – after this fact of mom’s passing, w/o an IRA court decision? Wouldn’t someone in IRS and/or CA probably question this to see about the legality and reason for that change? I assume then the burden and expense of that inquiry of any update correction would fall on me? So any change should take place BEFORE I claim IRA right? Also, the IRS and/or CA may then want to go into the SNT (which I’ve used on occasion) so at this point it may make more sense to avoid dealing w/ any potentially risky expensive unknowns (for me, and no one else). C) Comment: consider the fact that when an IRA goes into a SNT it has compressed highest tax. There may also be a 5 yr spend down time limit for an IRA in the SNT, but I’m not sure about this; if true, 2 or those 5 years have passed leaving just 3 yrs. So, from the tax standpoint the SNT may not have been the best option. I read that ideally a grantor of IRA should put it into a Roth for a SNT before their passing. Now, would it be less expensive in the long run to put IRA in SNT or claim IRA and loose $589.40/mo SSI income check and spend down IRA instead? I have no idea how to figure out the tax of these two options. If you do then please feel free to offer any suggestions or your what would you do if you were in my shoes opinion. D) Any idea why WF asked me to send them a copy of the SNT addendum after telling them they don’t have a copy (when they did)? How and why would they want to back peddle for themselves now? For me and my benefit? What other motive could they possibly have in asking me to send them a copy of SNT (besides restoring beni form to SNT for me)? That’s not my job, but I’m sure mom’s attorney could send them another copy, the same one he sent them in 2008. ((Rant: The WF custodian of mom’s IRA has a history of corruption and their lawyers bailing him out of his messes. There seems there may be a dubious relationship there. Could I be their next meal for lunch? The fact that that office denied ever knowning about the SNT after they sent me a copy of it is absurb. AND, that office had lawyers then write up fictitious conversations and “advice” that they supposedly had with me which never took place. So what would be next, for me, w/ this office? It seems like all they are interested in is lying to cover up; not the best interest’s of their clients, deceased elder mom’s intentions for me. Based on their behavior history with others, and me, I have no reason to believe or trust that “cooperating” with WF legal would benefit me ultimately, unfortunately… but I could be mistaken. E) Back to basic NY state law about custodian “duty” to accept a SNT as beni OR reject in writing; that reject letter would have been sent back to same attorney who sent them copy of SNT in 2008, right? Their duty would have been to reject in writing to mom’s attorney letter OR separate the beni form to name 1/3 IRA to SNT? And if he did the latter, would it have been custodian “duty” to send letter that that change/update was done? So, you are saying it is NOT legally normal or acceptable for a custodian to receive a copy of a SNT addendum from an attorney and then do nothing to acknowledge it (please confirm)? Also, if attorney never received reject or accept letter (I assume he didn’t, but will ask) is it attorney’s duty to follow up on the copy of SNT addendum that he sent custodian if no response? I am not sure who is responsible, for what would be considered right practice, and due diligence (technically, legally) on both sides. Please clarify if you can. F) Transfer of IRA account out of that office and into professionally competent responsible hands is a good idea. Legal question: if I claim/transfer IRA would that then release them of ‘potential for damages and bad faith punitive damages’? (The “IRA is in error” may be damages done and no action on my part can be affordable and/or change that fact. Also, I feel it is not my place or position to send legal docs to them to help them clean up their mess or undo their cover up efforts to date (for their benefit) when honestly given their track record thus far I really don’t think they would do anything for my benefit of their free good will… or they would have done that by now, don’t you think? They have had almost two years to take SNT and beni form to court to correct the error for me? The decent and right thing to do would have been for them to offer to correct their error. But WF custodian and lawyers are clearly not interested in doing the decent and right thing – ever – if it costs $. G) If I proposed to WF to transfer the account to another custodian right away if they will accept the SNT as beneficiary they may still need to go to court at their expense to prove that to correct the beni, so there is still this question about the legality of this process, if it would FIRST require a court hearing, YES OR NO, as beni is already in my name/soc as far as IRS is concerned? AND, they would have to accept the legal costs of correcting their error FIRST. (The SNT qualifies, in NY & CA). This process would take into the new year, as it is probably not likely they are going to put an acknowledgement in writing that the Trust is the beneficiary of an unqualified IRA and a commitment in paper w/o an attorney to challenge them. I’ve read it costs a minimum of $20K to get a court decision about a change of IRA beni form. H) There is also the concern of not wanting this to drag in into another year… as far as the IRS is concerned this could reflect badly on me (not WF)… are you sure I could ask for a pardon for 2013,14,15? (THREE years seems like something that would be questioned and possibly need more of a defense than a piece of tax form paper, no?) I) How would I find out if there was a WF reject in writing letter (which I so seriously doubt, b’c then there would be no need for WF to deny having ever received the SNT). I should have an attorney contact mom’s attorney for that info? Would NY who attorney who drafted SNT be required to provide me w/ that info. as beni of a SNT who (really may not have any legal rights regarding SNT; the IRA is legally separate at this point)? NY attorney could say he will deal only w/ Executor of estate and/or Trustee of SNT (my bro) and this attorney knows bro wishes not to help me address the real issues. If I needed for bro to ask mom’s attorney for letters about SNT between attorney and custodian, as Exec/Trustee is he obligated to help me with that? IF he didn’t would he be in breach of Exec/Trust duty? The IRA is part of estate, but NY attorney is now saying IRA is not part of estate.)J) Is it possible to ask the IRA to “qualify” an IRA that should have happened by Dec 20, 2013 – but didn’t b’c of above hardship disability status and other extenuating circumstances? I’m exhausted but making progress toward understanding issues to hopefully make decisions on Monday.For some reason, unable to edit/format this reply into paragraphs so have to send as is… sorry!Thank you.

Permalink Submitted by Lisa Ways on Sat, 2014-12-27 07:08

Dear IRA guru, Could you do me a HUGE helpful math calculation? What would approx RMD would be for 2013 + 2014 if I claim IRA/RMDs before Dec 31, 2014 deadline? My 1/3 share of individual IRA is currently $73,184.85 Mom passed age 86, on 3/19/2013. Mom did not take out her RMD that year. I am 56 years old. What would the check amount be approx? If you can answer this question it would be hugely helpful. But if not ok. Thank you.

Permalink Submitted by Lisa Ways on Sat, 2014-12-27 07:12

I forgot to ask… what would approx taxes be on that individual IRA amount of approx income?

Permalink Submitted by Alan - IRA critic on Sat, 2014-12-27 19:57

See my post on 12/15 where I indicated what the approximate RMDs would be in detail. Basically, your 2014 RMD would be about 2550 and your 1/3 share of your the 2013 RMD would be about 5200. These are approximate because you do not know what the 12/2012 and 12/2013 values were. My estimates just use the present value so these are rough estimates. As for your taxes, if you do not have any other income, there would be no taxes. If you are on SSD only, additional IRA income of 7750 would also not be enough to generate any income taxes. Your actual tax bill depends on your total income and deductions, but if you have not been paying any taxes before the IRA distributions, the distributions are not likely to be enough to generate a tax bill.

Permalink Submitted by Lisa Ways on Sun, 2014-12-28 06:59

Dear God and guru,Thank you so much. 1) SSI + SSD annual income = $10,912.80. Is same answer no taxes = $10,912.80 (+ ~$7,500)? 2) IF I claimed inherited IRA/RMD 2013+2014 on Dec 31, 2013, and check was sent, it would arrive after Jan 1, 2015. WOULD that check be considered 2013 + 2014 income, or 2015 income? I wouldn’t actually have the $ until 2015. 3) IF I claimed InIRA/RMD 2013+2014+2015 after Jan 1, 2015 would that be considered income for 2015? (Good news: I may have located an attorney who could be able to help sort out this mess, in the near future. In the meantime, your patience and gracious helpfulness is invaluable and very appreciated…)

Permalink Submitted by Alan - IRA critic on Sun, 2014-12-28 19:55

The IRA distribution must be processed by the custodian by 12/31 in order to appear on a 2014 1099R (none of it will be 2013 income). The date you receive it is not a factor. However, at this late date you will not know exactly when they processed it, and would have to call them to find out, OR if you do NOT receive a 1099R by the end of January, you will know that they did not get the distribution processed before year end. It would then become 2015 income, not 2014 even though you requested it in 2014. If they receive your distribution request tomorrow, they may or may not be able to get it processed by Wed. Let them know it is an RMD and they MAY give it priority. If it is processed in January, you still are likely to be able to get the penalty waived, and you already need to ask for a 2013 penalty waiver because the year of death RMD was not taken out by 12/31/2013. Be sure to DECLINE any withholding on the distribution.
You will have no federal or CA tax due if the only additional income is 7500 above SSI and SSD. In fact, you do not even have to file a return unless your IRA income exceeds 10,150 (10,300 for 2015 so even if your 2013 thru 2015 RMDs were all taxable in 2015, you would just be under the filing limit). Note that if your SNT is added as beneficiary and the SNT received the RMD, a Form 1041 would have to be filed every year.

Permalink Submitted by Lisa Ways on Sun, 2014-12-28 22:27

Incredibly helpful answer. Thank you so much, again. 1) If I send request to claim IRA/RMD, arrives by 12/31, could I request they process the distribution to appear on a 2015 1099R (it may be better for me if that IRA “income” were on a 2015, to replace my SSI annual income w/ IRA income, b’c I would be loosing that benefit and would want to keep income level the same (for other reasons; plus also IRA income repayment to SSI since mom’s passing may still be another issue to contend w/. I am thinking if I do this it should start w/ a new year that way…) 2) I know this is complicated… given the fact that I still don’t have a super lawyer (yet) and am trying to figure this out… if I claim IRA/RMD on 12/31, for 2015 processing, to count as 2015 income, would that be viewed as making the 12/31 deadline (technically, to void issue of penalty)? Can I have it both ways, as such? Or, should I wait until after Jan 1st to claim IRA/RMD for 2015 income; I’m just a bit worried about asking for a waiver if that’s avoidable. 3) Additionally complicated option… if I claim IRA/RMD, and hold checks (don’t cash them) could I still look into having SNT reformed to be the beni of IRA, then send uncashed checks to IRS or SNT trustee to take care of? I realize it could be far less complicated to fix the IRA beni first, then proceed… not sure about legalities as I am dealing w/ four different overlapping bodies of law… 4) If I pursue option of SNT reforming, I wonder how long that would take. You mentioned idea to take care of biz early in the year which I think would be wise, but I’m not sure possible as reforming a SNT beni requires a court decision, for a Trustee to accept it. (I was hoping if that were an option then WF could correct their error for mom, and me (at their expense, of course). 5) Or do the claim/RMD… and later about it later, the options, the damages of which pursuing could be a costly rabbit trail and bottomless pit of more inherited IRA hell not worth the stress… (Right now, my goal is to stabilize financial and living situation so I can sleep again at night and not have seizures from the stress b’c it is giving me brain and nerve damage, loss of speech and vision – no joke; not fun) and I may not survive another year of this if it continues unresolved.) Again for the info and numbers… I cannot say how helpful you’ve been. Thanks 🙂

Permalink Submitted by Alan - IRA critic on Mon, 2014-12-29 16:22

When you request a distribution at this time of year, you cannot control whether it will be processed in time. If they process it by 12/31, it can only be reported for 2014. You cannot ask them to delay reporting to 2015, so if you want the income to be in 2015, request the distribution next week and there will be no 1099R for 2014, no IRA income and no need to file a return. You already must request a waiver for the late year of death RMD for 2013, so it would be little extra work to add a 5329 for 2014 to request the waiver for 2014 as well and send them in together. I guess you will be basing the RMD on an estimate of the year end values of the IRA, so your RMDs will not be exactly right. You can probably get the exact valuations for year end 2012 and 2013 from WF. The IRS will almost always grant a waiver if you take the make up distributions and self report the omission with your waiver request. You have excellent reasons for requesting these waivers. When you do, you will not hear back from the IRS if they approve the waivers, only if they do not, so no news is good news. Q3 – If you held the checks and then got the SNT added as beneficiary, you could probably return the checks to WF for re issue to the SNT, but I agree that you should take the extra time to see if you can get WF to agree to accept the SNT as beneficiary. If they refuse, then you can decide whether to retain a lawyer or not spend more money on legal fees. You could tell WF you hope they will make the change so you do NOT have to retain an attorney… Q 4 – no telling how long it would take with or without a lawyer to get an answer from WF. If WF feels they made an error, they can reform the IRA immediately without a court decision. If they refuse, then it would take a court decision. NOTE: I cannot guarantee what any of these people will do. I am not an attorney and are not offering formal legal advice. I can only tell you what the IRS is likely to do in a given situation, but that is also subject to the individual judgement of the IRS agent.

Permalink Submitted by Lisa Ways on Mon, 2014-12-29 06:13

These questions are for you and/or IRA attorney: 1) Do I have a right to request from WF a complete history and accounting of the IRA (I’m 1/3 of it) connected to the 2004 cluster beneficiary form with the three siblings and/or including any paperwork connected to when/how it was separated last winter into three accounts at the “back office” as an “exception” (to show that the adverse 1/3 of beni form was/is the issue). I requested this info about 9 months ago (twice) and they ignored it. It is very difficult to get WF to say or do anything helpful for me so I wonder what my legal rights are to request what info… to perhaps have a lawyer make request for me. 2) Could a lawyer I retain have the right to request from mom’s/bro executor lawyer a copy of the cover letter that must have been sent w/ the SNT addendum to the IRA custodian in 2008? And I am curious to ask you what the content of such a standardized or routinely typical letter would say, if you happen to know. Thanks again 🙂

Permalink Submitted by Lisa Ways on Mon, 2014-12-29 06:48

A few more questions along the same line: When a custodian receives a copy of SNT addendum is it normal procedure for that person to approve and split the clustered beni form or reject, or would that person first send copy of addendum to legal dept for approval or reject? Then, I assume mom’s attorney would follow up on approval, or receive reject letter written by who? legal or custodian? If you know ok; if not ok

Permalink Submitted by Alan - IRA critic on Mon, 2014-12-29 16:31

Yes, it is normal for an IRA custodian to either accept or reject a change of beneficiary after a review from their legal dept if deemed necessary. Filing it without any response is negligent handling assuming the request is clear enough. If the SNT was just sent in without a clear request to add it as beneficiary, WF could use that to defend their actions. If the SNT was not drafted up to the requirements of their legal dept, they should have clearly rejected it and stated the areas of deficiency. Perhaps they did and attorney dropped the ball? WF has their own legal Dept, so any letter to her attorney could have been signed by either their attorney or any other employee they authorized to sign.

Permalink Submitted by Lisa Ways on Mon, 2014-12-29 18:52

Q1) Could you check w/ attorney to double check if FOR SURE – if WF feels they made an error, they can reform the IRA immediately without a court decision… I am asking b’c a CA attorney told me if WF changes a beni form AFTER grantor passes that is not legal. The corp Trustee of SNT wrote they would not accept IRA w/ SNT as beni w/o a court decision. Perhaps there is a communication disconnect and not everyone has all the facts. I want to be sure that I don’t ask WF to do something that is not legal (b’c my impression is their lawyers do things that are not right, like they are above the law, in the area of creative writing).Q) Would you please clarify when you say “Filing it without any response is negligent handling assuming the request is clear enough.” Filing what? w/ or w/o what response? Acceptance letter or reject letter? ((If the SNT was sent in with or without a clear request to add it as beneficiary, WF would say either way that they never received it. SNT was drafted up not great, but adequate, and is active. My guess is custodian and attorney dropped the ball.))

Permalink Submitted by Alan - IRA critic on Tue, 2014-12-30 03:29

Sorry, I do not have access to an attorney. It is possible that CA requires a post death court order, but I would require a citation before accepting that statement. The SNT has a corporate trustee, and are you comfortable with that trustee? Are there any other assets titled to the SNT? My comment regarding filing the SNT meant WF just holding the document in their files without acting with due diligence to determine the reason they received it. Speculating on this situation is difficult because one missing fact or date on the order of events would invalidate any conclusion. You might look into free legal advice despite quality limitations because you cannot afford to pay many hours of legal fees @ $350 dollars per hour and up. I would definitely not worry about getting a distribution out in the next two days as your chances for a penalty waiver are excellent. Besides, without the exact year end balances for 2012 and 2013, you RMD distributions would not be correct anyway. Further, it looks like even if you end up taking the 2013, 14 and 15 RMDs in 2015, you will still probably fall under the income tax filing requirement.

Permalink Submitted by Lisa Ways on Wed, 2015-01-07 00:34

Dear IRA Guru, just to update I have found your support and info invaluable to help me thru this difficult time. I am gearing up to proceed to the next step. May I ask for your opinion about what to say as excellent reasons for waiver petition (I know there are many, but I don’t know how to summarize and write it properly) for filing 2013, 14, 15 – and, if you were a CPA how could it be best phrased… well, this will likely be my next step (asap). U know a lot more about IRA ins and outs than they do. Hope u had a happy new year. TY.

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