Many years of missed RMDs, now deceased
I have a parent of a client who recently passed away and when going through their accounts at the request of my client i discovered no RMDs were taken for the last 14 or more years. Ouch. I assume the IRS isn’t going to forgive all the missed RMDs just because that individual has now passed away? Any suggestions on how to clean this up, or do they just go through the “pleading for mercy letter” and form 5329?
Permalink Submitted by Alan - IRA critic on Tue, 2016-05-03 21:16
If there is a direct beneficiary, IRS Regs clearly state that the year of death RMD must be completed by the beneficiary if the decedent did not complete it. For years prior to that, the situation is unclear. The beneficiary is not responsible for the excess accumulation penalties so there is no need to request a waiver of this penalty on Form 5329. For whatever reason, the IRS has not been contacting beneficiaries for missed RMDs for years prior to the year of death. However, if the decedent’s estate is the beneficiary and the estate is potentially subject to resolving all debts of the decedent, then the executor is in a bind because distribution of the estate before any potential back excise taxes are paid can result in personal liability for the executor. This is not usually cited as a major reason NOT to leave your IRA to your estate or fail to name a beneficiary, but perhaps it should be. You do not want to be the executor in this situation.