IRA bene did not taken by dec 1 of year after death
I have a new client that’s minor child inherited an IRA from deceased grandfather. He failed to take inherited account by 12/1 of year after death. What happens now? Is there a tax penalty?
I have a new client that’s minor child inherited an IRA from deceased grandfather. He failed to take inherited account by 12/1 of year after death. What happens now? Is there a tax penalty?
Permalink Submitted by Alan - IRA critic on Wed, 2025-01-08 12:43
The GC is a 10 year rule beneficiary, and even if GF passed after RBD, the annual beneficiary RMDs were waived for years 2021-2024.
But if you are referring to completing the GF’s year of death RMD, GC has until 12/31 of the year after death to complete that RMD, assuming that there were no other beneficiaries that might have done so. Therefore, if GF passed in 2023 or earlier without completing the year of death RMD, it is now late and should be taken by the GC and Form 5329 filed for the year the RMD was required to request that the penalty be waived for reasonable cause.
Permalink Submitted by Marcia Miller on Wed, 2025-01-08 22:20
Apologies, I did not provide enough details. GF died in 2023, before RBD. Account is still in GF name. Is there a requirement to take a distribution (or move to inherited IRA) before 12/31 of year after death under the 10-year rule? Or is that just for those that can stretch and need to take RMD’s?
Permalink Submitted by Alan - IRA critic on Wed, 2025-01-08 23:03
If GF passed prior to RBD, his beneficiary that is subject to the 10 year rule is not required to take any distributions until year 10 (2033). That said, the beneficiary may want to consider roughly equal distributions each year to spread the taxes and avoid a large total distribution in 2033.
The RMD requirement remains the same whether the beneficiary has had the account retitled or not, and should do so soon, but there is no annual beneficiary RMD requirement in this case.