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Relief for Missed RMDs Due to IRA Beneficiary Dispute


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An IRA owner who had begun receiving required minimum distributions (RMDs) during her lifetime died, following which a dispute ensued among beneficiary claimants to the IRA.  Litigation commenced in 2023 under an interpleader action by custodian bank, involving the decedent's 3 children on the one hand and her late husband's 2 children from a prior marriage on the other.  The latter had earlier in the IRA owner's lifetime been designated as co-beneficiaries of the IRA along with decedent's children.  However, husband's 2 children were removed as co-beneficiaries in an asserted "deathbed" change to the IRA owner's beneficiary designation wrought by alleged undue influence of her daughter at a time when the owner supposedly lacked capacity to make such a change.

Custodian bank advised the feuding beneficiary claimants that payment of the 2023 RMD needed to be made by 12/31/2023, suggesting the claimants work out an agreement under which the RMD would be distributed to one or more of them so as to avoid a missed RMD, with the distribution amount being reapportioned later, once the litigation concluded and the rightful beneficiaries were determined.  No agreement was reached, so the RMD wasn't paid.  Trial is scheduled for late 2024, and it appears probable that the case will not be resolved before 2025, raising the prospect of a missed RMD for 2024.

For the missed 2023 RMD, does it seem likely that the IRS will grant relief from any penalties on the basis of reasonable cause?  Is it possible/advisable to seek a private letter ruling from IRS for the anticipated failure to distribute the 2024 RMD, as the beneficiary claimants again will probably not agree on the disposition of the RMD?

Any other thoughts about how to resolve this RMD conundrum?

 

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If the owner died in 2020, 2021, or 2022 ( and died on/after their RBD), and the beneficiaries are designated beneficiaries ( who are not eligible designated beneficiaries ), the excise tax is automatically waived for 2021, 2022, and 2023.

I can't advise. But, if you do decide to seek a PLR, you would have the rest of the year to decide ( if the owner died in 2020, 2021, or 2022  and died on/after their RBD, because the excise tax would have been automatically waived for 2021, 2022, and 2023)

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

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A person who has claimed some portion of the IRA’s death benefit but has no custodian’s or court’s decision that she is entitled to a benefit might be unlikely to file a tax return self-declaring a tax on not having received a distribution by her required beginning date.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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