Topic: General Posts

Subject: Inherited IRA Distributions
David Watkins
Member: 2003
Posts:2
Submitted on 03-19-18 9:48 pm
Message:

I have a friend, ex of her hubby who died in 2014.  Today, she discovered that she is the beneficiary of his IRA.  I know that RMDs are required to start the year following the death.  


How should she proceed?  Is she required to withdraw the amounts that would have been required had she known about the IRA and assumed ownership?  Would the IRS waive those requirements and penalties, thus start the clock running now?


Any wisdom on this matter greatly appreciated.


 


David Watkins

 
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Replies
Matt Linn
Member: 2018
Posts: 1

Subject: Re:Inherited IRA Distributions

Submitted on 03-23-18 12:35 pm.
Message:

Hi David,


Good of you to seek assistance for your friend!


Sounds like there are at least 2 issues:


1) Period of time from date of death until notification - what are the impacts?


2) Taking ownership of the IRA and managing distributions.


For 1) I'd suggest she contact the institution that holds the IRA and ask these questions.  I do not know beyond that.


For 2) if she were his spouse at time of death, she may not be required to take RMDs (unless she is >= 70 1/2). Go to the Schwab website and look at the rules on Inheirited IRAs.  Spouses and non-spouses are treated differently. The Schwab website is generally clearer than going to IRS.gov.


Hope this helps!


Matthew Linn

 
John Dunn
Member: 2010
Posts: 1

Subject: Re:Inherited IRA Distributions

Submitted on 04-04-18 12:42 pm.
Message:

I would start with finding a trusted advisor - beyond yourself - that can help.  This may be a CPA or a Financial Advisor with a firm such as Edward Jones that your friend can talk with about the issues.  While a web site like Fidelity or Schwab can be very helpful to help frame the questions or develop a drill down question she would likely benefit from a one-on-one conversation.


 


I am sure your assistance will go a long way.  I recently helped someone get affairs in order after a sposue's passing and the biggest thing she appreciated was everything being in one place so she could understand the complete picture.

 
Mike Mogavero
Member: 2008
Posts: 1

Subject: Re:Inherited IRA Distributions

Submitted on 04-04-18 6:29 pm.
Message:

The following advice from an article by Ed Slott & Co. may be helpful here (the article references a missed RMD in 2015 only) :


3 Steps to Take


If you missed your RMD, keep calm. The IRS can waive the 50% penalty for good cause. Here are three steps you will need to take to have the penalty waived.



  1. Take the RMD. To have the 50% penalty waived by the IRS you must correct your error. You must take the RMD amount that was not taken in 2015.

  2. File the 2015 IRS Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. When you file this form, you do not have to prepay the penalty, but if the form is filed without payment of the 50% penalty and IRS determines that the penalty is owed, you could owe interest on the penalty payment. Form 5329 must be filed to start the statute of limitations clock.

  3. Attach a letter of explanation to Form 5329. The letter should include why the 2015 RMD was missed, the fact that it has now been taken, and that you have taken steps to be sure that future RMDs will be taken as required.


After submitting your request, you must wait for the IRS response. The IRS may respond to your waiver requests within a few months. If you have not heard from them in three years, they have granted the waiver.

 
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