Non-spousal inherited IRA
When a non-spousal beneficiary inherits an IRA from a deceased parent, where the parent was already taking RMD’s past the age of 70 1/2, my understanding is that this beneficiary (age 56) need only take annual distributions based on his own age as a qualified stretch IRA until his age 59 1/2. Is this correct?
In addition, if the beneficiary subsequently takes more than his RMD before he reaches age 59 ½ will he be subject to the 10 percent early withdrawal penalty on that excess distribution?
Permalink Submitted by Al Fry on Thu, 2008-08-21 21:59
1. Yes
2. No
Permalink Submitted by Jose Morales on Thu, 2008-08-21 22:28
In the year of death the beneficiary must take the deceased IRA owners mandatory distribution, if the IRA owner did not already do so before passing. The following year the non-spouse beneficiary may begin to take distributions calculated using their single life expectancy factor.
Permalink Submitted by Alan Spross on Thu, 2008-08-21 23:13
Re Q 1 – Age 59.5 has nothing to do with the non spouse beneficiary’s choices. The beneficiary must start RMDs in the year following death for every year that a balance remains in the account. This requirement does not stop at age 59.5. The answer to both questions would therefore be “No”.
Urusei is also correct regarding the RMD requirement for the year of death if the parent had not taken out the full amount prior to passing.
Permalink Submitted by Al Fry on Fri, 2008-08-22 01:47
Guess I should have read the entire question.
Permalink Submitted by [email protected] on Fri, 2008-08-22 13:26
[quote]Urusei is also correct regarding the RMD requirement for the year of death if the parent had not taken out the full amount prior to passing.[/quote]
Alan,
The above statement is true only if the parent died prior to their RBD of April 1 following the year they turn 70.5, correct?
Permalink Submitted by Alan Spross on Fri, 2008-08-22 20:59
jp,
Actually, no. The statement applies when the decedent passed AFTER their RBD, not prior to. There would not be any RMD to make up if a parent passed prior to the RBD. This is true even when the decedent passes in the year they reach 70.5, which is a distribution year, but the RMD for that year is erased as a beneficiary obligation when the owner passes prior to the actual RBD.
I assumed for the original post, that the parent passed AFTER the RBD, but that post really only indicated that they were past 70.5. It is possible that they were in fact 70.5 and had taken their first RMD, but still had not reached their RBD.
Permalink Submitted by [email protected] on Fri, 2008-08-22 21:20
Alan,
Maybe I used poor wording in my previous post but we agree 100%. If the decedent passed before RBD but after 70.5, there is no RMD for that year.
Thanks for confirming!
JP