01 Mar When do I have to empty this inherited IRA?
Q. My father was born in 1928 and he died in 2018 and my sisters and I inherited his IRA. I’m 66. How quickly do I have to empty the account?
A. We’re sorry to hear about your father.
Because he was older than 70 1/2, the IRS generally requires you — as the non-spouse inherited IRA owner — to start taking Required Minimum Distributions (RMDs) no later than Dec. 31 in the year following his death, said Martin Hauptman, Martin Hauptman, a partner in the trusts/estates and taxation groups at Mandelbaum Salsburg in Roseland.
“These annual distributions, which may be withdrawn at any time each year, will be spread over your father’s life expectancy – something that is determined by his age in the calendar year following his death,” he said, referencing this IRS table.
Had your father died later, the account would have been subject to the SECURE Act, which made major changes to inherited IRA distributions. You would have, as a non-spouse beneficiary, been required to take all the funds out within 10 years of your dad’s passing. The rule is in effect for IRAs that were inherited after Jan. 1, 2020.
It’s also important to note that your father may have failed to satisfy his RMD in the year that he died, Hauptman said.
“If that happened, and you failed to withdraw that amount in the same year, you will be subject to a 50% penalty on the amount not withdrawn,” he said.
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This story was originally published on March 1, 2021.
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