Managing inherited IRA distributions
Hello,
First off, Happy New Year and Thank You (god) for this awesome forum!
My mother passed away in 2020 – ugh, shocker – and I have set up a distribution plan with her T-IRA and Roth IRA custodian (entirely Vanguard). Would it be best to have the money deposited into my bank account and then transfer it to a non-retirement account somewhere, even back with Vanguard, or transfer the deposit directly into one of my existing non-retirement Vanguard accounts? Thank you for any feedback or advice.
Permalink Submitted by Alan - IRA critic on Fri, 2021-01-15 01:24
First of all, unless you are disabled or chronically ill on her DOD, you will not be subject to annual beneficiary RMD because you fall under the 10 year rule. For the 10 year rule, you will have no RMDs from 2021-2029, but must drain the inherited IRAs by 12/31/2030. You can still take distributions as you need them, but are not required to until 2030.
For the inherited TIRA, it is generally a good idea to take distributions gradually to prevent a large distribution in 2030 that could spike your taxes that year. But for the inherited Roth IRA, because the distributions will be non taxable, it is best to wait till later in the 10 year period to allow the Roth to generate additional non taxable earnings.
When you do take distributions, you can use either of the two destination options for the distribution. If the VG site allows you to specify another VG account to receive a transfer, be very sure not to click on another retirement account since your beneficiary distributions are not eligible for rollover. You will get a 1099R for each year’s distributions if you take any.