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Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3151
Experience:  EA, CEBS - 35 years experience providing financial advice
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My cousin is the beneficiary on her deceased ...

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My cousin is the beneficiary on her deceased mom''s 403b appx $412K. Her mom died in Dec. 2006 but my cousin was only contacted in Jan. 2008 by the annuity co. I believe that she needed to start distributions by Dec. 2007 in order to roll it into a beneficiary IRA which would have allowed her to take distributions on her life expectancy (she''s 24). Is there any provision to allow an exeption or will she HAVE to take all of the money out over 5 years?
Submitted: 8 years ago.
Category: Tax
Expert:  Bill replied 8 years ago.

If the 403(b) plan's provisions have the 5 year rule as the default provision if the beneficiary does not elect the life expectancy option then she is locked into the 5 year rule. However, if the plan's default provision is the life expectancy option, then there still may be an opportunity to spread the distributions over her life expectancy. If the life expectancy option is available, then she missed the 2007 required distribution and would be subject to the 50% penalty on that amount. However, the IRS may waive the penalty if the error was due to reasonable cause.


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