Amend 5 year choice Inherited IRA
Dad died 2017 at 65, as designated beneficiary 45 year old son opened Ben IRA and chose 5 year but now wants Lifetime. Can son simply transfer to new custodian, make RMD choice instead, and start RMDs in 2018? Thx
Thanks. He will transfer then. Has the IRS somehow already been notified? If not, am I correct there is no downside to transferring and making new RMD choice? Your colleague Sarah has an article on your site stating the 5 year rule is almost never a lock
- I think you may have posted without noticing that I edited my original response, eliminating reference to a transfer of the account. Further explanation on this gray area is in order. Also, note that the IRS is not notified of any election the beneficiary makes.
- A review of the IRS Regs (Reg 1.401(a)(9)-(3) Q 4 (c)) indicate that an election becomes irrevocable on the date LE distributions need to commence. That date would be 12/31 of the year following the IRA owner’s death. That wording suggests that such an election is revocable up to that date, but irrevocable after that date.
- PLR 2008-11028 cited above applied to an applicant that did NOT make an election either way, and extended the LE stretch option where no election and no distributions had been taken.
- Since it appears that because the deadline for an irrevocable election will not be until 12/31/2018, the son should be able to change the election with the current custodian, but if the current custodian’s agreement or operating procedures do not allow this, a transfer to a new custodian should allow the son to use the LE stretch.
Permalink Submitted by Alan - IRA critic on Tue, 2017-10-31 00:46
Son needs to read the beneficiary provisions in the IRA agrement carefully. While almost all IRA agrements use life expectancy as the default option when owner passes prior to the RBD, it is quite possible that if the son formally elected the 5 year rule the custodian will consider that election irrevocable. There is no clear IRS guidance on whether an election can be changed or when, but it is interesting to note that PLR 2008-11028 seems to suggest that an election is irrevocable.