Individuals husband passed away in 2011 and she was beneficiary on her husbands TIRA’s, she transfered some in TIRA in her name and some in Stretch however she has never taken any RMD’s from the Stretch IRA. What is the best way to correct this error?
the deceased husband was not 70.5 when he passed away, she is not 70.5 today so are you saying she can simply retitle the IRA to her name and did not need to take an RMD?
Yes. Her first RMD year for the account held as inherited will be the year in which her husband would have reached 70.5. Her first RMD year for the account titled with her as owner will be the year in which SHE reaches 70.5. If she is younger than he was, she should assume ownership of the inherited account no later than the year in which beneficiary RMDs would begin. With ownership elected, she will not have an RMD for the inherited account until she reaches 70.5.
Her deceased husband would have been 70.5 in 2018, she is currently 66. She did not take an RMD for 2018, is she safe to simply transfer the beneficiary IRA to her name without taking a 2018 or 2019 RMD?
Yes. As indicated above, because she did not take the 2018 RMD required as a beneficiary, she has defaulted to ownership of the inherited IRA at the end of 2018. And since she is under RMD age, there is no RMD she needs to take for any year until she reaches 70.5. Since she now owns the IRA, she should have it retitled as such so the titling conforms to the actual ownership status. Note that she should not take an actual distribution until after she has the IRA re titled which involves a transfer to a newly opened owned IRA account or to the IRA she already has. Then she can take any distribution she wants and it will not be reported as a distribution to a beneficiary.
Permalink Submitted by Alan - IRA critic on Fri, 2019-08-16 14:39
First, it should be noted that the inherited IRA is not subject to RMDs until the year her husband would have reached 70.5, if he passed before 70.5. Then, if she did have a beneficiary RMD for a year that she did not comply with, she defaults to ownership status, ie at the end of that year she is deemed to have assumed ownership even though the IRA has not been retitled. As the owner, her RMD is either eliminated for that year or is reduced because the Uniform Table will apply. If she still has an RMD due under the Uniform Table, then she must have the IRA re titled as the owner (inform custodian what has occurred), make up each year’s owner’s RMD and file Form 5329 for each such year requesting waiver of the 50% penalty for “reasonable cause” according to the Inst for Form 5329. The IRS typically will waive these penalties once the late RMDs have been taken and the Form 5329 completed properly. Therefore, the first thing to do is determine if she had an owner’s RMD due from the start of if they had to start in one of the later years. To do that both her DOB and that of her spouse need to be determined in order to determine the extent of missed RMDs as owner.