SEP IRA Contribution Post Death | Ed Slott and Company, LLC

SEP IRA Contribution Post Death

Hello,

Question, I have a client that is being informed that they might be able to make a SEP IRA contribution post death. The Decedent can make a contribution of about $50,000 for both 2018 and 2019 (decedent can maximize contribution $55K and $56K). The Decedent died in 2019. If the contribution was made, then there would be about a 50,000 tax savings and those SEP IRA contributions would transfer immediately to the designated beneficiary.

I see on this site the following:

4. CAN AN IRA OR ROTH IRA CONTRIBUTION BE MADE FOR A DECEASED PERSON IN THE YEAR OF DEATH (EMPHASIS ADDED)?
IRS says no because a dead person has no need to fund a retirement plan. Who can argue with that logic?

I found a PLR 8439066 (1984) that also says no. THe PLR says the following:

"Since A is deceased, the contribution made by Estate X would not be a contribution for retirement purposes. Since A had not
made a contribution to B's spousal IRA before her death, Estate X cannot, subsequent to A's death, make a contribution to B's
spousal IRA based upon the compensation A received during taxable year [the year of A's death].
Based on the foregoing, we conclude that Estate X cannot make tax-deductible contributions to an IRA on behalf of A, nor can
Estate X make tax-deductible contributions to B's spousal IRA for taxable year [the year of A's death]."

A CPA is saying that you might be able to make a SEP IRA contribution. Is that correct?

Let's assume that you cannot make a SEP IRA contribution, the 6% excise tax would be imposed, correct? Would that 6% excise tax be in addition to the income tax on the SEP IRA contribution, or separate. If it is not in addition to the normal tax, then aying a $6,000 is better than paying $50,000. Would that excise tax carry over to the beneficary?

Questions:
(1) Can the decedent's estate make a SEP IRA contribution post death for the year prior to the Decedent's death?
(2) Can the decedent's estate make a SEP IRA contribution post death for the year of the Decedent's death?
(3) Would the 6% excise tax carry over to the beneficiary as an excess contribution?

Thanks for the help.

Sincerely,

Joe Doherty

 

Find members of Ed Slott's Elite IRA Advisor GroupSM in your area.
We neither keep nor share your information entered on this form.
 

I agree to the terms and services:

You may review the terms and conditions here.