Broker refusing to provide form 5498

Submitted by Seth Ness on Tue, 2018-06-05 11:37

My grandfather died in march 2017 and I along with 11 other beneficiaries inherited his two IRAs which were actually distributed in Jan 2018.

Broker is refusing to create any Forms 5498 (or annual statements) for 2017. They keep repeating that Form 5498 is only needed when their are distributions.

I have shown them IRS instructions for 1099 and 5498 and IRS rev proc 89-52 which clearly state that they need to provide 5498 and annual statement for decedent and each beneficiary in year of death (and also BTW that %$(* is needed every year even if no distributions). But they just keep parting that they only make 5498 if their are distributions. (2017 RMDs were done late in jan 2018).

Are they right? Do I have any recourse to force them to produce the form? who can i file complaint with?



Submitted by Alan - IRA critic on Tue, 2018-06-05 17:58

  • There is considerable inconsistency among custodians on this matter, and having 11 beneficiaries probably exceeds the limit for support on their processing platform. There is also a terminology problem because a 5498 is never used to report distributions,  just contributions, fair market value of the account (usually at year end or DOD for the decedent’s 5498). Box 11 does not apply for beneficiary 5498 forms.
  • In this case, were the separate inherited IRA accounts coordinated, or were they established at different times? Was all retitling done in 2018? How many beneficiaries took lump sum distributions?
  • Check any statements issued for any beneficiary. Often, the year end value is only reported on a statement and no 5498 is issued. 
  • Even though the year of death RMD was distributed in January, the actual 12/31/2017 value of the account determines each beneficiary’s share of the balance on which their 2018 beneficiary RMDs are calculated. However, if the beneficiary listing on the 2 IRAs differ or if grandfather was not the original owner of both of these IRAs, the calculation of each beneficiary RMD will involve different factors. Relative to the year end balance all you need is an account statement at year end for both accounts, and a 5498 will not provide any additional information, so it probably is not worth battling with the custodian over.
  • Almost always when there are several beneficiaries, the retitling cannot be coordinated and some custodians drag their feet and delay setting up the inherited accounts until ALL beneficiaries have responded and this creates issues more frustrating that the lack of a statement of the year end balance.
  • When it comes to oversight of inherited IRA RMDs, the IRS basically has passed the responsibility to the IRA custodians. The IRS has never established control of inherited IRA RMD compliance.
  • Finally, because the year of death RMD was late and it became a joint responsibility of all beneficiaries upon his death, a 5329 should be filed for each beneficiary with their 2017 return. The penalty will likely be waived, but the best reasonable cause explanation should be provided with the 5329. If this was not done, it is probably safe enough to have the beneficiary that took the largest distribution file it stand alone as long as the distribution was itself enough to complete the late RMD. That would save the other 10 the work of all filing the same form. There is a very slim chance of ever needing this data, but best to play it safe and have at least one beneficiary keep a copy of the 5329 filed, usually the one that files it as long as they keep their returns for 5 years or so.
  • In summary, there might be more important considerations in this case than the lack of a 5498.

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