06 Oct I inherited an IRA. What’s the best way to take out money?

Q. After a long court battle, my sister and I, both 65, will inherit an uncle’s IRA worth more than $1 million. He had already been taking Required Minimum Distributions when he died. We are both over 65. I’m looking for options other than just liquidating the account and paying the IRS off. What should I expect?
— Beneficiary

A. It’s time to get together with your tax preparer.

The rules governing Required Minimum Distributions depend on when the original account owner died and what the relationship was between the original owner and the inheritor.

“When, as here, the original account owner died before Dec. 31, 2019, a non-spouse inheritor has the option of withdrawing all of the money from the inherited IRA within five years or taking Required Minimum Distributions over his or her lifetime,” said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

For inherited IRAs after that time, non-spouse beneficiaries must draw down the entire account in 10 years, but distributions don’t have to come out every year. When to take the distributions should depend on your tax situation.

In cases like yours, you must directly roll over the assets to an inherited IRA in your own name and then you’d use your age and the IRS Single Life Expectancy Table for calculating the RMD, Whitenack said.

“The CARES act temporarily waived Required Minimum Distributions for all retirement plans for the calendar year 2020,” she said.

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This story was originally published on Oct. 6, 2020.

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