1. Final distribution. If the IRA account owner was age 70 1/2 or older at death, they were required to take Required Minimum Distributions (RMDs). If the original account owner did not take his or her RMD for the year before dying, the beneficiaries are required to make the final RMD before December 31st of that year. There is a 50% penalty for failure to do so.
2. Required Minimum Distributions. Even when a decedent kept up-to-date beneficiary designations, financial institutions are not required to notify beneficiaries. If no information is left to the executor, or the beneficiaries were not made aware of the account while the decedent was alive, beneficiaries run the risk of missing RMD deadlines. Non-spousal beneficiaries are generally required to make RMDs by December 31st of the year after the decedent’s death. One way to help avoid this complication is by establishing an IRA trust – the trustee will be charged with the responsibility of dividing accounts into separate shares, if necessary, and arranging for the RMDs.
3. Escheatment deadlines. Not sure if you are the beneficiary of an IRA? Financial institutions have different policies for how long they keep inactive or abandoned accounts. If an individual is trying to locate a decedent’s assets, time may be of the essence. Depending on the financial institution’s policies and the age of the decedent, assets left in an IRA may eventually be turned over to the State of North Carolina through escheatment. According to the North Carolina Department of State Treasurer, the state considers savings accounts are “presumed abandoned five years from the date of the last documented instance of positive owner contact.” Until property passes to the state, interest continues to apply on the account. Traditional IRAs are addressed differently since federal law applies and “account balances may not be accumulated on an indefinite basis.” Roth IRAs have different distribution rules as well. These are critical areas where possible beneficiaries should consult with a North Carolina estate planning attorney.