When is the first distribution from this inherited IRA?

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Q. I am 41 years old and my mother passed away in February 2019 at the age of 65. I inherited an IRA from her which she had not started withdrawing from prior to her death. It is my understanding that (prior to COVID) I would have had to take an Required Minimum Distribution by Dec. 31 to use the life expectancy method. If I didn’t, then all funds would have to be withdrawn by the end of the fifth year after death. Is this correct?
— Unsure

A. We’re sorry for your loss.

We’re going to assume you have by now retitled the inherited IRA.

The deceased IRA owner’s name must remain on the inherited IRA account title and the account title must indicate that it is an inherited IRA by using the word “beneficiary” or “beneficiary IRA” or “inherited IRA,” said Jean McAllister, a certified financial planner with Peapack Private Wealth Management in Bedminster.

For example, it should read something like “Mary Smith INH BENE OF D Jones.”

McAllister said generally, inherited IRAs are included in the provision to waive Required Minimum Distributions (RMDs) for 2020, so the RMD distribution deadline should be extended to Dec. 31, 2021.

You can read more about this in IRS Notice 2020-51.

“If you are concerned that this provision might not be honored for some reason or misconstrued as an election of the five-year rule, then taking your distribution based on your life expectancy by Dec. 31, 2020 would unquestionably establish this election and preserve your RMD methodology going forward,” she said. “If you do waive your 2020 required distribution, be sure to consult your tax professional for guidance on calculating your first required distribution in 2021.”

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This story was originally published on Dec. 28, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.