Newly discovered Inherited IRA
I have a client who was recently notified by a custodian that he needs to distribute the proceeds of an IRA from his deceased mother. The issue is that his mother passed away in 2013. The account value is ~$20,000 and there are 6 beneficiaries on the account. This IRA was missed at the time of her death in 2013. There have been no required minimum distributions taken since she passed away. Given the balance of the account, does each beneficiary still need to file a 5329 with a 1040x for each year the RMD was missed (with the exception of 2020)?
Permalink Submitted by Alan - IRA critic on Thu, 2025-05-29 11:33
It’s fortunate that the account was not escheated to the state, but due to the small balance per beneficiary, they should probably have separate inherited IRAs established and then take a total distribution. The missed RMDs would have been based on the age of the oldest of the 6. Those beneficiaries that wanted to request the penalty waiver would have to determine what the RMD would have been for each year and then file a 5329 with 1040X for each such year except for 2020 requesting the waiver for reasonable cause (unknown account).
If mother passed prior to RBD, the 5 year rule would have been an option. To reduce the number of 5329 forms, based on the 5 year rule, the beneficiaries could make 2018 the first year for the entire balance in the account at the end of 2018. Same for 2019 and 2021 through 2024. Of course, the total amount of penalty waivers requested in this case would be much higher than the annual RMDs, and that decision would have to be based on the assumption that the IRS would waive the penalties as they have been in the past.
Permalink Submitted by Nicholas Bucci on Thu, 2025-05-29 14:28
Thank you very much. This is extremely helpful.