rescinding the decision to take an inherited ira
Client’s 81 year-old mother passed away one month ago. The mother has an IRA (already taking RMD’s), naming several children, including client, as beneficiaries. Mother’s broker-dealer sent Client paperwork to set up an inherited IRA, which was completed one week ago. However, Client, age 57, in this case would be better served by taking the distribution, and paying the tax. Can the Client have the rollover to the Inherited IRA rescinded (if done by this year-end), and distributed as a death benefit, thereby avoiding the 10% excise tax?
Permalink Submitted by Alan - IRA critic on Mon, 2017-12-04 23:06
There is no need to attempt a recission. Client should just take the lump sum distribution from the inherited IRA. It will be coded as a death benefit (code 4) on the 1099R so will not be subject to the 10% early withdrawal penalty. Any distribution to the client would be a death benefit since he could never be considered the owner of the account, such as the case for a spousal beneficiary.