A sole proprietor had a SEP IRA plan. She died in 2008, at age 78. Her husband was the death beneficiary and about the first of December requested a payout equal to the 2008 required minimum distribution for his dead wife. The brokerage house refused, saying he must first set up rollover IRA in his name as surviving spouse and take the required distribution from the rollover IRA.
The surviving husband refused to do that, on advice of legal counsel that the 2008 required distribution for his dead wife was not eligible for rollover and if rolled over, would cause a 6% penalty. In addition, the withdrawal from the rollover IRA would not satisfy the 2008 required distribution for the dead wife.
The brokerage house held tight when this advice was explained to its technical compliance and then legal departments. December 31 passed with no distribution being taken, and now a 50% penalty applies.
Should the husband notify the IRS about this situation? Is the brokerage house that refused the withdrawal request responsible for paying the 50% penalty?
QUOTE (Oh so SIMPLE @ Jan 11 2009, 10:39 AM) 
A sole proprietor had a SEP IRA plan. She died in 2008, at age 78. Her husband was the death beneficiary and about the first of December requested a payout equal to the 2008 required minimum distribution for his dead wife. The brokerage house refused, saying he must first set up rollover IRA in his name as surviving spouse and take the required distribution from the rollover IRA.
The surviving husband refused to do that, on advice of legal counsel that the 2008 required distribution for his dead wife was not eligible for rollover and if rolled over, would cause a 6% penalty. In addition, the withdrawal from the rollover IRA would not satisfy the 2008 required distribution for the dead wife.
The brokerage house held tight when this advice was explained to its technical compliance and then legal departments. December 31 passed with no distribution being taken, and now a 50% penalty applies.
Should the husband notify the IRS about this situation? Is the brokerage house that refused the withdrawal request responsible for paying the 50% penalty?
The surviving husband refused to do that, on advice of legal counsel that the 2008 required distribution for his dead wife was not eligible for rollover and if rolled over, would cause a 6% penalty. In addition, the withdrawal from the rollover IRA would not satisfy the 2008 required distribution for the dead wife.
The brokerage house held tight when this advice was explained to its technical compliance and then legal departments. December 31 passed with no distribution being taken, and now a 50% penalty applies.
Should the husband notify the IRS about this situation? Is the brokerage house that refused the withdrawal request responsible for paying the 50% penalty?
I would recommend he go back to his legal counsel.
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