How are distributions from inherited IRAs handled?


Q. What are the rules governing inherited traditional IRAs for children younger than 59 1/2?
— Unsure

A. There have been changes in recent years about how distributions from inherited IRAs are handled.

It’s always been the case that distributions from an inherited IRA before age 59 1/2 are not subject to the 10% early withdrawal penalty.

But there are other considerations because of the SECURE Act of 2019, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.

He said before the act, an individual named as an IRA beneficiary could establish an inherited IRA and take the distributions over their lifetime in what was called a “Stretch IRA.”

“Under the new law, non-spouse beneficiaries must withdraw all the money from an inherited IRA within 10 years of the death of the accountholder,” Maye said. “Interestingly the individual is not required to take an annual amount, but all the money must be taken within the 10 years.”

There are exceptions to the rules for a surviving spouse, minor children of the accountholder, disabled or chronically ill beneficiaries or a participant who is not 10 or more years younger than the original IRA account owner, Maye said.

For a minor child, if that child is the sole beneficiary, there is a required annual withdrawal based on the child’s life expectancy until the child reaches the age of majority. This is usually 18 or 21, depending on the state. After that time, the 10-year clock starts and the account must be emptied by the end of the 10 years.

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This story was originally published on April 13, 2021. 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.