Missed RMD?? Advisors said one wasn’t needed.

Submitted by Melissa Leathers on Fri, 2017-01-13 16:53

A person died on November 29, 2015. His Roth IRA was transferred to a Bene Roth in March of 2016. All advisors, as well as the advisor’s software, said that no RMD was required for 2016. At the end of 2016, the Bene Roth was being transferred to another investment firm, and due to a glitch in paperwork, the account never got transferred to the new firm by December 31, 2016 (the client was not aware of the hold up). New advisor also said no RMD was required. The client is elderly and totally relies on the advisors.

The account balance at 12/31/15 was $50,000. The person was not married, and his mother was the beneficiary. She was 78 years old at the end of 2016. All of this was realized on January 12, 2017.

1) Is an RMD required from the Bene Roth for 2016?
2) Does it make a difference that the Bene Roth was not opened until 2016, and therefore the client did not own the Roth on 12/31/15?
3) What is the best explanation on the 5329 that should get the penalty waived, if am RMD was required?



Submitted by Alan - IRA critic on Fri, 2017-01-13 19:39

  1. Unless the beneficiary elects the 5 year rule instead of life expectancy, there IS a 2016 beneficiary RMD required. My guess is that these advisors are not assuming the 5 year rule which is usually not the best choice, rather they are treating his mother as if she was the surviving spouse. A sole beneficiary surviving spouse does not have to take a beneficiary RMD until the year the decedent WOULD have reached 70.5, and he would not have reached 70.5. Correct advisor software entry should have indicated a non spouse beneficiary.
  2. The inherited IRA establishment date does not change the RMD requirement for the beneficiary.
  3. A statement that the advisor indicated no RMD was due should suffice. For such self reported RMD penalty waivers after the late RMD has been distributed, the IRS usually waives the penalty.

Submitted by Bruce Steiner on Fri, 2017-01-13 21:56

What’s an “advisor”?  What did the lawyer handling the estate say?

Submitted by Melissa Leathers on Sat, 2017-01-14 00:32

Advisor, meaning her financial advisor – the ones handling the Bene Roth’s.  The IRA’s did not go through the estate, so I doubt the attorney knew anything of it.

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