RMDs from Inherited IRAs
By Beverly DeVeny, IRA Technical Expert
Follow Me on Twitter: @BevIRAEdSlott
You inherited an IRA or Roth IRA in 2014. Do you have to take a required minimum distribution (RMD) this year?
The answer for all non-spouse beneficiaries is generally yes. The age of the account owner in the year of death does not matter. The age of the beneficiary this year does not matter. It does not matter if the account is an IRA or a Roth IRA. If the beneficiary was named on the beneficiary form, then there is an RMD that must be taken by 12/31/15.
If the beneficiary was not named on the beneficiary form but instead inherited through the will or estate, then the answer is maybe. The type of IRA and the age of the IRA owner at the date of death are the determining factors. When the account is a Roth IRA or when the traditional IRA owner dies before April 1 of the year after turning age 70 ½ (the required beginning date or RBD), then the inherited account must be paid out over five years. There is no RMD in any of the first four years. In the fifth year, the RMD is the entire remaining account balance.
For a spouse who inherits an IRA and chooses to remain a beneficiary, then the answer again is maybe. The spouse beneficiary does not have an RMD until the year the deceased spouse would have been age 70 ½.
For example, Mark is age 62 and Jean is age 58 when Mark passes away. Jean chooses to remain a beneficiary of Mark’s IRA so she does not have an RMD until Mark would have been age 70 ½, eight years from now.
Let’s add 10 years to the example and make Mark age 72 and Jean age 68 in the year Mark passes away. Now Jean will have an RMD from the inherited IRA in the year after Mark’s death because he is past age 70 ½. Note that Jean will only be age 69 that year. Jean should not keep Mark’s account as an inherited IRA but should instead move the funds to her own IRA where she will not have an RMD until the year she is age 70 ½.
The rules for taking RMDs from inherited IRAs may not be as simple as you might think. It is always a good idea to consult with an IRA expert to determine both when you need to take an RMD from an inherited account and how much you must take out to avoid any additional taxes and penalties.