Correcting Missed RMD for thirteen years

Talk about Correcting Missed RMD! The most alarming case of missed Required Minimum Distributions I have ever seen is for 13 years of missed distributions.

The person was referred to us to evaluate a variable annuity he was sold when his mother passed away. She has passed 14 years prior.  The IRA accounts she has were consolidated into a new variable annuity.

However that is where the error was made.  The stockbroker was excited, sad his client had passed, nonetheless excited to have retained the funds.

The stockbroker opened a new account.  The various accounts were put all into this one annuity – which is okay to do.

The annuity was not designed to hold a variable annuity.  The annuity had an income rider and a couple of other features that aren’t allowed on inherited IRA accounts.

We put the variable annuity company on the phone.  They at first denied any responsibility.  They wanted to distribute the entire annuity and wash their hands of the issue.

After escalating the issue to a special department we were able to make some progress.  The annuity company retroactively calculated the missed RMDs and released that money.

After receiving that money we again reached out to the annuity company.  This time to address the riders that were not allowed to be installed on an inherited IRA.  This resulted in approximately $14,000 being returned to the client’s inherited IRA.

There is one more rider for us to retroactively remove…

Correcting Missed RMD

In the meantime, once the RMDs had been distributed (over $40,000) we filled out the paperwork with the client.  The paperwork being the appeal to the IRS to waive the penalty for missing the RMD’s.

This is somehow in the queue with the IRS.

Now, to have the financial advisor pay the fees for processing all of these requests… to the tune of about $10,000.

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