Inherited Traditional IRA distribution rules for non-spouses
This entry was posted on 12/7/2006 3:27 PM and is filed under uncategorized.
"Heirs who are not surviving spouses don't have the option of treating inherited IRAs as their own. However, they do have two choices of withdrawal rules. First, minimum withdrawals can be taken over the life expectancy of the beneficiary starting
no later than Dec. 31 of the year after death. The other choice is to withdraw the entire balance no later than Dec. 31 of the fifth year after death." - more:
IRA
My comments: So you are looking at two choices. For about five years, you can withdraw the money as you like, including taking a total distribution. The withdrawals should be
code 4 distributions, on account of the prior owners death, and not subject to the 10% early distribution tax, but subject to regular income tax as ordinary income. The other option is to treat the IRA as a quasi annuity. Receiving payouts over a long number of years, based upon life expectancy rules. For example, if the life expectancy is 25 years, you would receive roughly 4 percent of the total value per year. Traditional IRAs on occasion have a basis. Any basis your inherited IRA may have would be on account of prior non-deductible contributions. Tracking down this basis from prior years, may be worth the effort. If a $100,000 value IRA has a basis of $10,000, 10 percent of its distributions would be excluded from tax.
