Non-spouse beneficiary IRA options
A son inherits IRA from his mother. Are his options immediate taxable distribution, 5 year distribution, or stretch based on his life expectancy? What happens if he doesn’t take any RMDs and no withdrawals after 5 years? What is the IRS penalty?
Permalink Submitted by Kristin Kippen on Thu, 2008-01-31 00:01
His options as a non-spouse beneficiary are immediate distribution or distributions over his life-expectancy. If he does not begin MRDs by the year following the year of death and continue those until the account is depleted, his penalty is the same as anyone who does not take MRD – 50% of the amount that should have been withdrawn. He is allowed to take as much as he wants each year and not incur a 10% penalty (assuming he is under 59 1/2) from the beneficiary account, but he must take his minimum distribution or incur the 50% penalty.